Singapore has entered a technical recession after its economy contracted 41.2 per cent in the second quarter from the previous three months, according to a press release by the Ministry of Trade and Industry.
A weak external demand amidst a global economic downturn, as well as the “circuit breaker” measures that were implemented from 7 April to 1
June to slow the spread of COVID-19, which included the suspension of nonessential services and closure of most workplace premises, contributed to the contraction.
How The Sectors Performed
The manufacturing sector grew by 2.5 per cent on a year-on-year basis in the second quarter, primarily due to a surge in output in the biomedical manufacturing cluster.
For example, Covid-19 test kits were being mass manufactured by local biomedical companies to meet the demand for testing.
However, a weak external demand and workplace disruptions during the circuit breaker period in the chemicals, transport engineering and general manufacturing segments pulled down the figure.
Overall, the manufacturing sector shrank by 23.1 per cent, a sharp reversal from the 45.5 per cent expansion in the preceding quarter which reported a 8.2 per cent growth.
Also badly hit by circuit breaker measures is the construction sector which contracted by 54.7 per cent on a year-on-year basis in the second quarter. The previous quarter reported a 1.1 per cent decline.
A stoppage of most construction activities during the period, as well as manpower disruptions to curb the spread of COVID-19, including movement restrictions at foreign worker dormitories, had contributed to the decline.
As a result, the construction sector shrank by 95.6 per cent in the second quarter, far worse than the 12.2 per cent contraction in the previous quarter.
The services producing industries contracted by 13.6 per cent on a year-on-year basis in the second quarter, steeper than the 2.4 per cent decline in the previous quarter.
Within services, tourism-related sectors like accommodation and the
air transport sector were severely affected by global and domestic travel
restrictions, which brought visitor arrivals and air travel to a standstill.
Meanwhile, domestically, services sectors such as food services, retail and business services were significantly affected by the measures.
In particular, the F&B sector saw many shop closures and the retail sector has been seeing a slew of bankruptcies such as sportswear retailer Sportslink, minimalist lifestyle brand MUJI and supplement retailer GNC.
The services producing industries shrank by 37.7 per cent in the second quarter, extending the 13.4 per cent decline recorded in the preceding quarter.
Recovery Of Economy “Slow And Uneven”
According to Minister of Trade and Industry Chan Chun Sing, Singapore’s economic recovery in the months ahead will be “challenging”, with the journey “slow and uneven”.
“The numbers clearly reflect the extent of the challenges facing our economy amid the COVID-19 pandemic and the hard work ahead of us to restore the economy,” said Minister Chan in a Facebook post.
His comments came after the release of the GDP preliminary data, adding that the figures were expected.
“The road to recovery in the months ahead will be challenging. We expect recovery to be a slow and uneven journey, as external demand continues to be weak and countries battle the second and third waves of outbreaks by reinstating localised lockdowns or stricter safe distancing measures,” he added.
In April, about 3,800 companies closed down, compared to the average of 3,700 recorded in the same month over the past five years.
In addition, since Phase 2’s reopening on June 19 and as more people return to the workplaces, workplace infections have risen from 22 per cent before Phase Two to 36 per cent now.
As a result, this may delay Phase 3 of reopening and subsequently, the recovery of Singapore’s economy.
Featured Image Credit: Gov.sg