Singapore’s economy will shrink by 11.8 per cent in the second quarter year on year, according to the latest Monetary Authority of Singapore (MAS) Survey of Professional Forecasters.
In Q1 2020, it contracted by 0.7 per cent compared with the same period last year, slightly less than professional forecasts of a 0.8 per cent decline in the previous survey in March.
As a result, Singapore’s full-year gross domestic product (GDP) is expected to decline by 5.8 per cent in 2020, down from an estimate of 0.6 per cent growth in the previous survey.
Year-on-year % Change For Key Macroeconomic Indicators:
The Government has downgraded its 2020 GDP forecast four times to a range of minus 4 per cent to minus 7 per cent – making this year’s slump Singapore’s worst recession since independence.
Tighter Global Financial Conditions
As in the previous survey, a tightening in global financial conditions, an escalation in the global COVID-19 situation, as well as heightening of trade tensions, were cited as the top three factors that could potentially weigh on financial market and lending conditions in Singapore.
The share of respondents who cited tighter global financial conditions as a factor rose to 76.9 per cent in the current survey, compared to 30.0 per cent in the March survey.
Respondents also cited a weaker S$NEER (Singapore dollar nominal effective exchange rate), fiscal stimulus measures, and a global economic recovery supported by the containment of the pandemic as other potential upside drivers.
An escalation in the COVID-19 situation once again topped the list of downside risks to Singapore’s growth outlook identified by respondents, with 94.4 per cent of respondents citing it and 72.2 per cent ranking it as the top downside risk.
An escalation in trade tensions was identified by 38.9 per cent of respondents as a downside risk, compared to 35.3 per cent in the previous survey.
Compared to the previous survey, about twice as many respondents were concerned about the risks stemming from the deterioration in the labour market, including a rise in unemployment.
GDP Projected To Expand By 2021
GDP growth is expected to recover to 4.8 per cent for 2021 as a whole. The respondents, on average, estimate that the Singapore economy is most likely to grow by at least 4 per cent next year.
For the whole of 2020, all respondents expect corporate profitability to decline. More than three quarters believe private residential property prices will decline, while 60 per cent project that SGD corporate bond spreads will remain stable.
In 2021, respondents predict an improvement in corporate profitability,
with 100 per cent expecting an increase. About two-thirds expect private residential property prices to rise in 2021, and 60 per cent project that bond spreads will fall.
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