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Singapore is in a technical recession

By July 14, 2020Current

TL;DR – On a quarter-on-quarter seasonally adjusted annualised basis, our economy shrank by 41.2 per cent.

It has been a few days since the General Election (GE2020). It’s quite an interesting one. Like PM Lee had said, it’s a clear mandate, although the popular vote was not as high as he or the People’s Action Party (PAP) had hoped.

Here, in case you’re curious how GE2020’s popular vote of 61.24% for the PAP fares vis-a-vis past GE performance.

Well, Singaporeans have spoken.

They clearly still want the PAP to be government (in fact, the political scene in Singapore is a strange one, where even the opposition parties want the incumbent to remain in power), but also want to have sound opposition voices in Parliament for diversity, for check and balance.

Someone said this rather beautifully on Facebook. For now, for us, the best sky is mostly white with some blue, and a hint of red peeking through.

It’s time now to put away our political and ideological differences and stand united as a country. We need to refocus and look at what is important, and I can’t put it more succinctly than how the PAP manifesto had:

Our Lives, Our Jobs, Our Future.

 

Don’t forget, we’re still in the middle of a health and economic crisis.

In fact, SM Tharman had rightly pointed out that the COVID-19 pandemic is also a social crisis, since it affects some more than it does others. Social mobility and equality are still important, if not more important, now.

And oh, news just in. Singapore’s officially in technical recession.

A technical recession refers to two straight quarters of quarter-on-quarter contraction. We’re still not out of the woods of the pandemic and I think we can expect unemployment and retrenchment numbers to rise in the next labour market reports.

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The economic recovery will likely take a couple of years since this is a global pandemic. We need to brace for more challenging times and hardship ahead.

According to the Ministry of Trade and Industry (MTI), Singapore’s Gross Domestic Product (GDP) contracted by 12.6 per cent in the second quarter of 2020.

Full Press Release from MTI

Singapore’s GDP Contracted by 12.6 Per Cent in the Second Quarter of 2020

Based on advance estimates, the Singapore economy contracted by 12.6 per cent on a year-on-year basis in the second quarter of 2020, due to the Circuit Breaker (CB) 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, as well as weak external demand amidst a global economic downturn precipitated by the COVID-19 pandemic.

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy shrank by 41.2 per cent in the second quarter.

Sectoral Performance

The manufacturing sector grew by 2.5 per cent on a year-on-year basis in the second quarter, slower than the 8.2 per cent growth in the previous quarter. Growth during the quarter was primarily due to a surge in output in the biomedical manufacturing cluster. On the other hand, weak external demand and workplace disruptions during the CB period weighed on output in the chemicals, transport engineering and general manufacturing clusters. On a quarter-on-quarter seasonally-adjusted annualised basis, the manufacturing sector shrank by 23.1 per cent, a sharp reversal from the 45.5 per cent expansion in the preceding quarter.

The construction sector contracted by 54.7 per cent on a year-on-year basis in the second quarter, a significant deterioration from the 1.1 per cent decline in the previous quarter. Construction output weakened on account of the CB measures which led to a stoppage of most construction activities during the period, as well as manpower disruptions arising from additional measures to curb the spread of COVID-19, including movement restrictions at foreign worker dormitories. On a quarter-on-quarter seasonally-adjusted annualised basis, the construction sector shrank by 95.6 per cent in the second quarter, far worse than the 12.2 per cent contraction in the preceding quarter

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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. Other outward-oriented services sectors such as wholesale trade and water transport were adversely affected by a fall in external demand as many countries around
the world grappled with the COVID-19 pandemic. Meanwhile, domestically oriented services sectors such as food services, retail and business services were significantly affected by the CB measures. On a quarter-on-quarter seasonally adjusted annualised basis, 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.

MTI will release the preliminary GDP estimates for the second quarter, including performance by sectors, sources of growth, inflation, employment and productivity, in its Economic Survey of Singapore in August 2020.

The numbers 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.

In fact, the figures are almost expected, given the CB measures that lasted almost two months, as well as the disruptions to global economic activity caused by the lockdowns in many countries that were similarly trying to fight the virus.

Last month, the IMF announced that it expects global GDP to shrink by 4.9 per cent this year due to the impact of the pandemic, a larger decline than the contraction of 3 per cent it previously projected.

It will not be an easy path ahead of us. All the signs are pointing towards a recovery that is going to be slow and uneven, 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.

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Domestically, the pace of our recovery will also depend on how well we manage the public health situation and whether we are able to keep infections in the community low. And all of us need to play our part, as businesses and as individuals.

It looks kinda scary that almost half the economy has been wiped out. But do not that these numbers are on an annualized basis, so it’s bad, but not bad-bad (yet). Still, I’m extremely worried. I mean, I was expecting a recession, but I wasn’t expecting to see 42%.

We really need to come together as a nation to fight this.

We really need to rally and take care of one another.

Together, we will overcome.

 

(Featured image via)

 

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Gabrielle Teo

Author Gabrielle Teo

I read lots, and I also spend an indecent amount of time trying to get my mostly unpopular opinions published. Oh, I argue a lot with fellow Singaporeans who complain incessantly about Singapore too.

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