1 Good morning and welcome to this online press conference.
2 Details of Singapore’s economic performance in the first quarter of 2020, as well as the growth outlook for 2020 are contained in the press release. Let me highlight the key points.
Economic Performance in First Quarter 2020
3 On a year-on-year basis, GDP contracted by 0.7 per cent in the first quarter, reversing the 1.0 per cent growth in the previous quarter.
- The decline in GDP was primarily due to contractions in the wholesale & retail trade, transportation & storage and accommodation & food services sectors.
- On the other hand, the manufacturing sector expanded, largely because of robust output expansions in the biomedical manufacturing and precision engineering clusters.
- The finance & insurance and information & communications sectors also grew, supported by strong growth in the banking and insurance segments, and firms’ sustained demand for IT solutions respectively.
4 On a quarter-on-quarter seasonally-adjusted annualised basis, the Singapore economy contracted by 4.7 per cent, a pullback from the 0.6 per cent expansion in the preceding quarter.
Economic Outlook for 2020
5 In March, MTI highlighted that the escalation of the COVID-19 outbreak worldwide had led to a significant deterioration in the external economic environment. Since then, the disruptions to economic activity in major economies around the world have been more severe than expected. In its April review, the IMF projected that the global economy would contract by 3.0 per cent in 2020, with most of the major advanced and emerging economies expected to see full-year recessions.
- In the US, GDP is projected to decline in 2020 on the back of sustained weakness in personal consumption expenditure. The curtailment of economic activity from “stay-at-home” orders issued by state governments has triggered large-scale job losses and weakened consumer spending. Even as the states begin to re-open, consumer spending is unlikely to recover strongly in the near-term given heightened uncertainties in the labour market.
- Similarly, the Eurozone economy is expected to be in recession this year, as measures implemented by the Eurozone countries to contain the spread of COVID-19 have taken a heavy toll on economic activity and weakened labour market conditions.
- In Asia, China’s economy is projected to slow sharply in 2020 due to the measures imposed to curb the spread of COVID-19. Private consumption growth is expected to remain weak as households cut back on spending due to uncertainty about the future and subsequent waves of infections. Exports growth is also likely to be subdued because of sluggish global demand. Meanwhile, growth in the key ASEAN economies of Malaysia, Thailand and Indonesia is expected to be weighed down by weak external demand and domestic consumption as a result of the COVID-19 outbreak.
6 There remain significant uncertainties in the global economy:
- First, there is a risk that subsequent waves of infections in major economies such as the US and Eurozone may further disrupt economic activity. In particular, if infections start to rise and strict measures such as lockdowns and movement restrictions are re-imposed, the downturn in these economies could be more severe and prolonged than expected.
- Second, a growing perception of diminished fiscal and monetary policy space in many major economies could damage confidence in authorities’ ability to respond to shocks, undermining risk appetite and driving further financial market volatility, with negative spillovers for the broader global economy.
7 Against this backdrop, the outlook for the Singapore economy has weakened further since the last review in March.
- First, outward-oriented sectors such as manufacturing, wholesale trade and transportation & storage will be adversely affected by the sharper-than-expected slowdown in many of Singapore’s key markets, as well as more prolonged supply chain disruptions.
- Second, the Circuit Breaker (CB) measures implemented to contain the COVID-19 outbreak in Singapore, which include the closure of most workplace premises, have further dampened domestic economic activity, along with domestic consumption. In particular, consumer-facing segments such as retail and food services have been negatively affected by the measures. Firms across most sectors, especially those that cannot operate fully from home, have also been working under reduced capacity as a result of the workplace closures and the fall in demand.
- Third, sectors like construction and marine & offshore engineering have been severely affected by manpower shortages due to the outbreak of infections among foreign workers, especially those living in foreign worker dormitories.
8 Nonetheless, there are pockets of resilience in the Singapore economy. Within the manufacturing sector, the biomedical manufacturing cluster is expected to continue to expand, supported by the production of pharmaceutical and biological products. Among the services sectors, the information & communications sector is also projected to continue to grow given firms’ resilient demand for IT and digital solutions.
9 Taking into account the weaker external demand outlook for Singapore as well as the expected impact of the CB measures, the 2020 GDP growth forecast for Singapore is downgraded to “-7.0 to -4.0 per cent”, from “-4.0 to -1.0 per cent”.
10 At this juncture, I should emphasise that while MTI has downgraded the GDP growth forecast, there continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery, in both the global and domestic economies. In particular, how the Singapore economy performs in the second half of 2020 will depend in part on whether we are able to continue to contain the domestic outbreak after we emerge from the CB period. To this end, the Multi-Ministry Taskforce has announced a phased approach to the resumption of economic activities from 2 June onwards, starting with those that do not pose a high risk of transmission. This cautious approach is necessary in order to ensure that we minimise the risk of a resurgence of infections in the community even as we re-open our economy.
11 Together with my panel members, I am happy to take your questions now.