SINGAPORE: The Singapore economy is expected to contract by 5.8 per cent this year, according to economists and analysts polled in a survey by the Monetary Authority of Singapore (MAS) released on Monday (Jun 15).
This is a sharp reversal from the 0.6 per cent growth expected by economists in the previous survey.
The forecast comes as survey respondents cited an escalation in the COVID-19 pandemic as a key downside risk to Singapore's growth outlook.
The country is bracing for its worst recession, with authorities last month cutting growth projections for 2020 yet again, to between -4 and -7 per cent.
READ: Singapore's GDP expected to shrink between 4% and 7% as 2020 growth forecast cut again on COVID-19 impact
Survey respondents were pessimistic about the 2020 outlook for sectors that have been badly hit by the global pandemic, including wholesale and retail trade, accommodation and food services and private consumption.
They predicted the accommodation and food services sector would see a 26 per cent contraction this year, much greater than the 1.6 per cent contraction previously predicted.
The outlook was also pessimistic for the wholesale and retail trade sector, which is expected to contract by 12.8 per cent, as compared to the 0.7 per cent contraction forecast previously.
Survey respondents also predicted an 11.4 per cent contraction for the construction sector, a sharp reversal from the 2.4 per cent growth predicted in the previous survey.
Private consumption is expected to contract by 5.2 per cent, from the 1.9 per cent growth previously predicted.
Non-oil domestic exports are not expected to grow this year.
However economists were slightly more optimistic in other areas.
The manufacturing sector is now expected to grow by 2.2 per cent for 2020, as compared to the 0.3 per cent contraction predicted in the previous survey.
The finance and insurance sector is expected to post growth of 3.1 per cent, up from the 2.6 per cent growth predicted previously.
An escalation in the current COVID-19 outbreak continued to top the respondents' list of downside risks to Singapore's growth outlook.
Escalating trade tensions and risks stemming from a deterioration in the labour market, including a rise in unemployment, were also identified as concerns.
Singapore's GDP growth is expected to rise to 4.8 per cent in 2021 as a whole. Respondents on average estimated that the economy would most likely grow by at least 4 per cent next year.
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"A BATTLE OF RISK FACTORS FOR SINGAPORE"
Economists' downgrading of the full-year GDP growth forecast is unsurprising, given the cut in the official growth forecast last month, said Ms Selena Ling, head of treasury research and strategy at OCBC Bank.
How quickly Singapore's economy reopens will depend on the novel coronavirus situation, she said.
"Whether the COVID-19 situation is contained or escalates again will drive the speed of the reopening of the Singapore economic engines, and in turn also potentially determine the external economic environment and headwinds like the US-China trade tensions," said Ms Ling.
The domestic labour market is "something to watch", she said, predicting that total and resident unemployment would climb higher by the end of the year.
Singapore’s unemployment rate climbed to its highest in a decade and total employment registered its sharpest quarterly decline in the first quarter of this year, as the labour market felt the early effects of COVID-19.
There is perceived headroom for additional fiscal stimulus for the Singapore economy, said Ms Ling.
Nevertheless, the extent of deterioration of the domestic labour market is something to watch, she added, as it depends on the speed of the Government’s previously announced initiative to create and roll out 100,000 jobs and traineeships "to buffer the downside risk of job layoffs and wage cuts which could dampen consumption and weigh on local consumer confidence".
"We see total and resident unemployment as likely to climb higher to 3-3.5 per cent and 4.0-4.5 per cent respectively by end-2020," she said.