Singapore plunges into recession as economy shrinks 41%

SINGAPORE: Singapore plunged into recession in the second quarter as growth fell 41.2 percent quarter-on-quarter with the trade-dependent economy hammered by the coronavirus.

Preliminary data show the economy shrank 12.6 percent between April and June as strict curbs were imposed to fight the virus. It marks the second consecutive quarter of contraction which means that the city-state has entered a recession for the first time in more than a decade.

The massive second-quarter drop in GDP was due to “measures that were implemented from 7th April to 1st June to slow the spread of COVID-19, which included the suspension of non-essential services and closure of most workplace premises,” the ministry said in a statement.

It also attributed to the contraction to “weak external demand amidst a global economic downturn”.

The sectoral impact was broad-based with the services and construction sector hardest hit. Construction, which has cometo a near halt, plummeted 95.6% on an annual basis. On a year-on-year basis, GDP dived 12.6% versus economists forecast for a 10.5% contraction.

The manufacturing sector grew 2.5% from a year ago, mainly due to a surge in output in biomedical sector, though that was still lower than the 8.2% rise in the first quarter.

The GDP slump marked the second consecutive quarter of contractions for the global finance hub – having declined a revised 0.3% year-on-year in the first quarter and 3.3% quarter-on-quarter – meeting the definition for a technical recession.

The government expects full-year GDP to contract in the range of -7% to -4%, the biggest downturn in its history.

The central bank eased its monetary policy in March and has introduced measures to boost bank lending, while the government has pumped in nearly S$100 billion ($72 billion) worth of stimulus to blunt the impact of the pandemic.

The People’s Action Party, which extended its unbroken rule in last week’s election held in the midst of the pandemic, has said protecting Singaporean jobs is its biggest priority.

Singapore is viewed as a barometer for the health of global trade and has one of the world’s most open economies. However, it is highly sensitive to external shocks and the gloomy figures are another ominous sign for the global economy.