GDP contraction widened to 13.2% in Q2

MTI’s economic forecasts were also further slashed for 2020.

Singapore’s economy further contracted 13.2% YoY in Q2, compared to the 0.3% decline posted in Q1, according to data from the Ministry of Trade and Industry (MTI).

The fall in GDP was due to the Circuit Breaker (CB) measures implemented from 7 April to 1 June, as well as weak external demand amidst a global economic downturn caused by the COVID19 pandemic.

On a QoQ seasonally-adjusted basis, GDP contraction widened to 13.2%, the economy contracted by 13.1%, sharper than the 0.8% fall in the previous quarter. As a result, MTI further slashed its GDP forecast for 2020 to “-7% to -5%” from %-7% to -4%” in the previous report.

Amongst sectors, the construction sector contracted by 59.3% YoY, deteriorating further from the 1.2% contraction in the previous quarter, as almost all construction activities stopped during the CB period. Construction firms were also affected by manpower disruptions arising from additional measures to curb the spread of the virus, including movement restrictions at foreign worker dormitories.

This is followed by the accommodation and food services sector, which moderated 41.4% YoY from the 23.8% crash in Q1. The accommodation segment shrank on the back of a plunge in international visitor arrivals arising from border controls and weak global travel demand. Meanwhile, the food and beverage segment contracted due to the prohibition of dining-in activities from 7 April to 18 June.

The transportation and storage sector deteriorated by 39.2% YoY, which also came worse than the 7.7% decline in Q1. The air transport segment dipped no thanks to a steep decline in air passengers handled at Changi Airport. Similarly, the water transport segment contracted both total sea cargo volume handled and container throughput fell. The land transport segment shrank, leading to a sharp reduction in commuter volumes on public transport.

Meanwhile, the business services sector dropped 20.2% YoY, worsening from the 3.4% decline in the previous quarter. Within the sector, the real estate and “others” segments contracted because of the workplace restrictions imposed during the CB period, whilst the professional services segment was adversely affected by weak demand as both domestic and regional business activities slowed.

The wholesale and retail trade sector shrank by 8.2% YoY from the 5.6% slip in Q1, as both the wholesale trade and retail trade segments contracted. The wholesale trade segment was weighed down by a contraction in the machinery, equipment and supplies and “others” sub-segments. The retail trade segment was also adversely affected by weak sales as most retailers were prohibited from operating at their physical outlets between 7 April and 18 June. 

Furthermore, the manufacturing sector reversed to a 0.7% YoY contraction in Q2 from a 7.9% growth in Q1. The manufacturing output faced pressures from output declines in the transport engineering, general manufacturing and chemicals clusters.

On the other hand, output in the biomedical manufacturing, electronics and precision engineering clusters rose. In particular, the electronics and precision engineering clusters were supported by better-than expected demand for semiconductors from the 5G market, data centres and cloud services, and semiconductor equipment from leading foundries, respectively.

Likewise, the information and communications sector also recorded a mild contraction of 0.5% YoY from 2.6% growth in the previous quarter. The telecommunications segment shrank on account of weaker demand for roaming and prepaid services due to reduced overseas travel. In contrast, the IT and information services segment expanded because of healthy enterprise demand for IT solutions.

Unlike most sectors, the finance and insurance sector expanded by 3.4% YoY, albeit a slower pace from the 8.3% growth in the preceding quarter. It was underpinned by steady expansions in insurance and other auxiliary activities, with the latter supported in turn by an acceleration in the adoption of digital payments.

Lastly, the “other services industries” contracted by 17.8% YoY from the 3.7% contraction in the first quarter, no thanks to the weak performance of the arts, entertainment and recreation (AER) and “others” segments. Both segments were negatively affected by the CB measures, which led to many firms in the segments being unable to operate at their physical premises. The same segment was also weighed down by the fall in international visitor arrivals.