S’pore’s economy to eke out 0.6 per cent growth in 2020 despite Covid-19: MAS survey of economists
Tourists on Sentosa in late January in the early part of the Covid-19 outbreak. Economists expect food and accommodation services to be the hardest hit sector in Singapore in 2020
SINGAPORE — Despite warnings from some medical experts in Singapore that the Covid-19 outbreak could last until the end of the year, private economists here still expect the city-state to eke out economic growth of 0.6 per cent for 2020.
Nevertheless, this projection is markedly lower than the 1.5 per cent full-year growth that the economists tipped in the previous survey, published in December by the Monetary Authority of Singapore (MAS), which polls private economists every quarter.
In the March 2020 survey, released by MAS on Wednesday (March 11), the economists expect Singapore’s gross domestic product (GDP) — which measures economic output — to contract by 0.8 per cent for the current first quarter of 2020. This is the median estimate of 21 economists who responded to the MAS survey.
The median forecasts for the remaining three quarters of 2020 are all in positive territory.
The economists say food and accommodation services will be the hardest hit part of the local economy for 2020, contracting 1.6 per cent.
They cited the escalation of the Covid-19 outbreak as the biggest downside risk to Singapore’s growth outlook.
Worsening trade tensions between the United States and China, identified as a downside risk by most economists (87.5 per cent) in the previous survey, has now taken a backseat, with barely one in three (35.3 per cent) of respondents citing it as a downside risk.
Geopolitical risks, including uncertainties over the upcoming presidential elections in the US, were among the risks economists say could negatively impact their projections.
Conversely, containment of the Covid-19 outbreak and global central banks around the world adopting a looser monetary policy are some of the “upside risks” cited by economists, in a reference to events that could mean their forecasts are too pessimistic.
The Ministry of Trade and Industry has acknowledged the economy might shrink in 2020 in its latest forecast of between -0.5 and 1.5 per cent for the whole year. This was downgraded from an earlier forecast of between 0.5 and 2.5 per cent growth.
Before this March survey, economists had also downgraded their own forecasts for Singapore as well for regional economies, such as the member countries of the Association of South-east Asian Nations (Asean).
On Wednesday, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye published a research note stating that they expect Singapore’s economy to contract by 0.3 per cent for the whole of 2020. They see a slump in the first half year, with a modest recovery in the second half.
DBS economist Irvin Seah had previously lowered its forecast for Singapore from 1.4 per cent growth to 0.9 per cent.
Several retailers and food and beverage outlets have previously said that their business has been hit hard with the Covid-19 outbreak, with some reporting a drop in sales by as much as 80 per cent.
In their note, Dr Chua and Ms Lee noted that the Government has “ample fiscal room” for a possible second stimulus package, in addition to measures announced on Feb 18 in the 2020 Budget.
The remaining surplus is still S$7.7 billion, despite the large deficit for the 2020 financial year, they noted.
The Straits Times has reported that the Government is working on a second stimulus package as the Covid-19 outbreak and global economy has taken a turn for the worse.
Deputy Prime Minister Heng Swee Keat, who spoke at a roundtable organised by The Straits Times and Business Times, said that the Government is also not ruling out dipping into the past reserves to fund this second package.
Dr Chua and Ms Lee wrote in their research note that the S$4 billion Stabilisation and Support Package unveiled during this year’s Budget was “focused on restructuring, transforming and retraining, with most of the funds to be deployed slowly and over a longer term”.
The Government can play a bigger role as the “insurer of last resort” by implementing a second package which can be “bolder”, that addresses immediate cash flow needs and help firms survive this crisis, they said.
The second package could include a targeted Jobs Credit Scheme, an expanded Temporary Bridging Loan programme, the loosening of interest and mortgage rates, as well as cuts in foreign worker levies, the economists wrote.
