GDP growth forecast revised down to 0.5% for 2020

This falls at the lowest end of the earlier official forecast announced last November.

Singapore’s official growth outlook for 2020 has been revised downwards to -0.5% to 1.5%, with growth expected to come in at the midpoint of 0.5%, according to the Ministry of Trade and Industry. This comes as the COVID-19 outbreak reversed the expected recovery of the global electronics cycle and the supposed pick-up of economic growth globally.

The forecast falls at the lowest end of MTI’s earlier GDP forecast of 0.5% to 2.5%, announced last November 2019.

Also read: Economy to contract 1% in Q1 amidst nCov outbreak: analysts

The economic outlook weakened considerably since its last review in November, the MTI noted. The weaker growth outlook in several of the country’s key final demand markets, which include China, will affect outward-oriented sectors such as manufacturing and wholesale trade.

Firms in these sectors could also be affected by supply chain disruptions arising from prolonged factory closures and labour shortages in China. The marker has been implementing travel restrictions and lockdowns in several of its major cities, taking a toll on trade accessibility. This has resulted in a pullback in China’s household consumption as well as disruption in the country’s industrial production, which in turn will negatively impact other Asian economies through lower outbound import demand from China as well as supply chain disruptions.

“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,” it added.

The outbreak has also led to a sharp fall in tourist arrivals, particularly from China to Singapore. China accounts for 19% of visitor arrivals in Singapore. An earlier report by DBS Equity Research warned that Singapore hotels’ performance may imitate the 42% fall in daily average rate during the SARS outbreak.

Further, domestic consumption in Singapore is sighted to decline as locals cut back on shopping and dining-out activities.

Also read: 60% of F&B businesses are not prepared for COVID-19

Despite these headwinds, the construction sector is projected to remain resilient and post steady growth in 2020 given the rebound in construction demand since 2018. The information & communications sector is also expected to expand on account of sustained enterprise demand for IT solutions.