Opening remarks by PS Mr Gabriel Lim for Economic Survey of Singapore 2019

1 Good morning and welcome to MTI.

2 Details of Singapore’s economic performance in the fourth quarter of 2019 and the full year of 2019, as well as the growth outlook for 2020, are contained in the press release. Let me highlight the key points.

3 Growth in the Singapore economy picked up in the fourth quarter of 2019.

a. On a year-on-year basis, GDP grew by 1.0 per cent in the fourth quarter, faster than the 0.7 per cent growth in the third quarter. Growth in the quarter was largely supported by the finance & insurance, other services and business services sectors.

b. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 0.6 per cent, moderating from the 2.2 per cent growth in the third quarter.

4 For 2019 as a whole, the Singapore economy expanded by 0.7 per cent, slower than the 3.4 per cent growth achieved in 2018. Full-year growth was supported by the finance & insurance, other services and business services sectors.

5 Let me now turn to the economic outlook for 2020.

6 At the Economic Survey of Singapore media briefing in November last year, MTI announced a GDP growth forecast of “0.5 to 2.5 per cent” for 2020. The forecast was premised on a modest pickup in global growth, along with a recovery in the global electronics cycle, this year. Since then, the COVID-19 outbreak has affected China, Singapore and many countries around the world.

a. In Asia, the COVID-19 outbreak is likely to dampen the growth prospects of China and other affected countries this year.

i. In China, GDP growth in 2020 is expected to come in lower than earlier projected due to lower household consumption as a result of the lockdowns and travel restrictions implemented in several major Chinese cities to contain the spread of the virus. Industrial production has also been disrupted because of work stoppages and delays arising from these containment measures.

ii. These developments in China will, in turn, have a knock-on impact on regional economies, including the ASEAN economies, through lower outbound tourism and other import demand from China, as well as disruptions to supply chains.

iii. Regional economies directly affected by the COVID-19 outbreak, such as Japan, Thailand and Malaysia, may also experience a drop in domestic consumer sentiments, and hence private consumption growth.

b. Elsewhere, the outlook for the US and Eurozone economies in 2020 remains broadly unchanged. GDP growth in the US is projected to moderate this year as compared to last year, while GDP growth in the Eurozone economy is expected to be similar to last year’s.

7 At the same time, uncertainties in the global economy remain.

a. First, should the COVID-19 outbreak be more widespread, severe and protracted than anticipated, there could be a sharper pullback in global consumption, as well as more prolonged disruptions to global supply chains and production. A sharper-than-expected slowdown in the Chinese economy arising from the outbreak will also negatively affect global trade and economic growth.

b. Second, notwithstanding the Phase 1 trade deal between the US and China, US-China trade relations remain uncertain, especially as they turn to more contentious issues in the next phase of their negotiations.

c. Third, geopolitical tensions in the Middle East could lead to volatility in financial and commodity markets, which will have negative spillover effects on the region and Singapore.

8 Against this backdrop, the outlook for the Singapore economy has weakened since the last review in November. In particular, the COVID-19 outbreak is expected to affect the Singapore economy through several channels.

a. First, outward-oriented sectors such as manufacturing and wholesale trade will be affected by the weaker growth outlook in several of Singapore’s key final demand markets, including China. Several firms in these sectors are already affected by supply chain disruptions arising from prolonged factory closures and labour shortages in China as a result of the measures implemented by the Chinese government to contain the outbreak.

b. Second, the outbreak has led to a sharp fall in tourist arrivals, particularly from China into Singapore. This has badly affected our tourism and transport sectors.

c. Third, domestic consumption in Singapore is likely to decline as locals cut back on shopping and dining-out, as they did during SARS. This will adversely affect firms in segments such as retail and food services.

d. Nonetheless, there are pockets of relative strength in the Singapore economy. These include the construction sector, which is projected to post steady growth on the back of the rebound in construction demand since 2018. The information & communications sector is also expected to remain resilient on account of sustained enterprise demand for IT solutions.

9 Taking into account the global and domestic economic environment, the GDP growth forecast for 2020 is downgraded to “-0.5 to 1.5 per cent”, from “0.5 to 2.5 per cent”. MTI’s baseline view at this juncture is for GDP growth to come in at around 0.5 per cent, around the mid-point of the forecast range. However, as the COVID-19 situation is still evolving, there is a significant degree of uncertainty over the length and severity of the outbreak, and hence its overall impact on the Singapore economy. MTI will continue to monitor developments and their impact on the Singapore economy closely.

10 Together with my panel members, I am happy to take your questions now.