COVID-19 Pandemic Makes Singapore Economy Recession After Its GDP Contraction 41.2 Percent

Illustration. (Photo: Unsplash)

JAKARTA - Singapore's economy has had to fall into a recession. The reason is, in a statement released Tuesday, July 14, the Singapore Ministry of Trade and Industry reported that gross domestic production (GDP) contracted 41.2 percent in the second quarter of 2020 compared to the previous quarter.

Quoted from Reuters, Wednesday, July 15, the situation was caused by the impact of circuit absorber or social restrictions on business and retail spending in anticipation of the spread of the COVID-19 virus. The contraction figure was even worse than the expectations of economists who had forecast a contraction of 37.4 percent.

Rob Carnell, chief economist, Asia-Pacific at ING Bank, said the economic situation in Singapore was a reflection of the impact of a lockdown by a country.

In June, the International Monetary Fund (IMF) warned that there would be a sharp contraction in global economic activity as the health crisis shuts down businesses, suppresses consumption and cripples international trade.

The IMF estimates that 2020 world economic growth will shrink by 4.9 percent, compared with the 3.0 percent contraction predicted in April.

The COVID-19 pandemic, has infected more than 13 million people worldwide and killed nearly 573,000. Singapore has reported 46,283 positive cases of COVID-19, with 26 deaths as of Monday 13 July.

"There is an element of influence from a weak global economy from the downturn in Singapore's economy. In addition, before the pandemic, the trade side was very important for Singapore, and when it was a pandemic, it was completely wiped out," said Carnell.

The sectors hardest hit in Singapore were services and construction. The construction sector has plunged 95.6 percent (quarter to quarter / qtq), or is almost paralyzed when cities under quarantine have to "stop" due to the COVID-19 pandemic.

Meanwhile, trade-oriented sectors have also been weighed by easing global activity and escalating US-China tensions.

However, there is an optimistic tone from Alex Holmes, Asia economist at consultancy Capital Economics. He said activity in Singapore had recovered since the easing of the lockdown as of last month.

"While many industries, especially tourism and hospitality will continue to suffer, the economy will have to recover faster than others in the region. The main reason for optimism is the record size of the government's stimulus package, which is equivalent to about 20 percent of GDP," he said.