Singapore—The Monetary Authority of Singapore (MAS) warned on Tuesday (Apr 28) that the country’s economic growth prospects have gotten even more dire. This means that the country should be prepared to face the worst recession it has experienced in a number of years.
The Authority said that salaries may likely be reduced, but added the large fiscal stimulus from the Government means that many jobs will not be cut and that companies need not close down.
The Straits Times (ST) said in an article in both its print and online platforms that the gross domestic product (GDP) has been forecasted to decrease between one and four percent. In the past, the closest Singapore has gotten to this was back in 1964, when the GDP suffered a 3.1 percent contraction. If this year’s recession reaches the low end of the forecast, it will be even worse than in 1998, when it contracted by 2.2 percent.
What is happening in this year’s crisis could be even worse than in the recent past. MAS said, “There are significant downside risks to Singapore’s growth outlook. The materialisation of any combination of these risks could bring GDP growth below the projected minus 4 to minus 1 percent range.”
The country’s financial position has been affected by the shrinking of export market demands, as well as current circuit breaker restrictions and travel bans.
For the second quarter of this year, the GDP will likely suffer a sharp drop due to the circuit breaker restrictions that saw many people staying home from work.
MAS added that how quickly the coronavirus outbreak is controlled will determine the near-term outlook.
As for the top three banks in Singapore, they have already forecasted a GDP contraction of between four and 10 percent, which will greatly affect the demand for labour. “Wages, rather than employment, will bear the brunt of the labour market adjustment in the near term,” said MAS, which, however, believes that unemployment numbers will nevertheless increase.
Irvin Seah, a senior economist from DBS Bank, is quoted by ST as saying, “Indeed, this will be the darkest year for the Singapore economy since independence.” The bank foresees an increase in retrenchments by 45,600, and the unemployment rate among residents may reach a seasonally adjusted 4.2 percent. However, many analysts believe that foreign workers will bear the brunt of job losses.
Nevertheless, the S$63.7 billion in fiscal measures from the Government will go a long way toward saving both companies and jobs, according to MAS.
Heng Swee Keat, Singapore’s Financial Minister as well as its Deputy Prime Minister acknowledged MAS’ warning in a Facebook post on Tuesday (Apr 28) and urged Singaporeans to stay resilient and united in these challenging times.
“As highlighted by the Monetary Authority of Singapore (MAS) in its report today, our near-term economic outlook is fraught with uncertainty. There is much that is still unknown about the virus. There is no certainty that countries can contain the virus by the second half of this year. If the pandemic is prolonged, the downturn will be more severe… Let’s be vigilant to the uncertainties, remain resilient as we hold the course, and stay united as we go through this difficult period.”
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