Singapore—The managing director of the Monetary Authority of Singapore, Ravi Menon, warned on Monday (Oct 12) that the current pandemic may cause “deep scarring” to as much as twenty per cent of the country’s economy, with the tourism and aviation sectors expected to take serious hits.
“What is going to happen to the industry when the planes haven’t flown, the pilots haven’t flown for months on a stretch?” Bloomberg quotes him as saying. “It’s not like picking up after taking two months off. When you take two years off, it’s very different.”
At a virtual event hosted by the Institute of International Finance, Mr Menon said that between ten and twenty per cent of Singapore’s economy is facing “deep scarring from which they may not recover,” due to the Covid-19 pandemic.
The economy, heavily reliant on trade as it is, is already in recession. Local estimates say that it could see its most serious contraction on record, of about five to seven per cent in 2020.
In response, the Government allotted almost S$100 billion in stimulus funds to aid lagging businesses as well as to save as many jobs as possible.
According to Menon, the country is yet to see the worst of the economic fallout from Covid-19, adding that he expects to see more bankruptcies and bad loans into the beginning of next year, as well as face the question as to whether or not banks will be needing more capital.
The MAS head said, “What I’ve not heard, and I think people are beginning to talk about, is whether you need to raise new capital. It’s not going to be easy in a time like this.”
He added, “In a funny sort of way, the pandemic has made us all a lot more sensitive and aware of how vulnerable we are to the forces of nature.”
According to economists, economic recovery will be sluggish, although things are looking up for the latter part of the year.
“Improving the outlook for 4Q are government preparations to reopen further, including arrangements for air travel bubbles.
Reopening will have its limits, though, absent a widely available vaccine.
This — along with income losses and higher debt burdens from the virus crisis — will limit the scope of the recovery in 2021.
Growth and inflation are past their troughs seen in the second quarter,” said Chua Hak Bin and Ju Ye Lee, Maybank Kim Eng Research Ltd. economists, said in a report from October 5.
“But the recovery is sluggish and more U-shaped than V, dampened by strict border controls, social distancing rules and foreign worker shortages.” —/TISG