GDP could contract 4% to 7% in 2020: MTI

Weak external demand will continue counter projected expansion of the manufacturing sector.

The Ministry of Industry and Trade (MTI) now expects the country’s growth domestic product (GDP) to shrink to -7% to -4%, a broader decline compared to its previous forecast of -4% to -1%, according to a press release.

External demand is projected to further deteriorate and the economic impact of the circuit breaker measures may worsen. However, MTI stated that the manufacturing sector is likely to expand, supported by the production of pharmaceutical and biological products. Amongst the services sectors, the information and communications sector is projected to grow given firms’ resilient demand for IT and digital solutions.

In Q1, MTI revealed that Singapore’s economy contracted 0.7% YoY, a reversal from the 1% growth in Q4 2019. On a QoQ basis, the economy shrank by 4.7% as most sectors saw declines.

The construction sector dipped 4% YoY, weighed down primarily by a fall in private sector construction works. The wholesale and retail trade sector also shrank 5.8% YoY as the wholesale trade segment was dragged by weaker global demand and disruptions in supply chains, whilst the retail trade segment saw a fall in the volume of motor vehicle sales and discretionary goods.

Likewise, the transportation and storage sector contracted 8.1% YoY as all transport segments continue to post waning tourist and cargo numbers. The accommodation and food services sector crashed 23.8% YoY due to a plunge in international visitor arrivals and gross lettings at gazetted hotels. Food services segment contracted as food caterers, restaurants and other eating places recorded a fall in sales.

Business services slipped 3.3% YoY on the back of contractions in the real estate, professional services and “others” segments. The “other services industries” contracted by 3.4% YoY, weighed down by the arts, entertainment and recreation segment.

On the other hand, the manufacturing sector expanded by 6.6% YoY, thanks to the performance of the biomedical manufacturing, precision engineering and transport engineering clusters. These segments have outweighed output declines in the electronics, general manufacturing and chemicals clusters.

The finance and insurance sector also rose 8% YoY thanks to strong growth in the banking and insurance segments, whilst the information and communications sector grew 3.5% YoY as there was a sustained demand for IT and digital solutions.