Based on advanced estimates, Singapore’s 2Q20 GDP had contracted by a record 12.6% year-on-year, marking its first technical recession since the first quarter of 2009. It is also the worst contraction on record outpacing market expectations for a 10.5% decline on year.
Barring an unexpected upsurge in coronavirus (COVID-19) cases, the local economy should see a gradual pick-up in growth on the back of more business-friendly Phase Two and subsequently Phase Three measures. The opening up of tourist attractions from as of 1 July, coupled with more hospitality venues opening up to allow staycations, may be a first step to recovery in tourism-related sectors. However, a sustainable and robust recovery for related industries such as food and beverages, hotels and hospitality, transport and entertainment will still be dependent on the opening of Singapore’s borders to international visitors.
There still remains a high degree of uncertainty due to the unpredictable nature of the virus. Pharmaceutical exports only accounted for 9.9% of non-oil domestics exports (NODX) in 2019, while the biomedical manufacturing cluster weighed in just below 20% of total industrial production. This suggests that any exacerbation of the COVID-19 pandemic globally will likely be more detrimental than beneficial for Singapore’s manufacturing environment. Beyond the pandemic, other potential risks to growth disruption would be from brewing geopolitical flare-ups and trade tensions which may intensify in the second half of 2020.
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