DBS expects Singapore economy to shrink by 0.5% this year, Latest Singapore News - The New Paper

DBS expects Singapore economy to shrink by 0.5% this year

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Bank says recession appears inevitable as it downgrades growth forecast

A recession in Singapore "appears inevitable", said DBS Bank as it now sees the economy shrinking by 0.5 per cent this year, instead of the 0.9 per cent growth it forecast last month.

Several other economists also have grim outlooks for the year.

The downgraded forecast still comes with significant downside risks should the coronavirus outbreak worsen further, DBS Bank economist Irvin Seah said in a research note yesterday.

He also expects total retrenchments for the year to reach about 24,500, slightly above the 23,430 in 2009 during the global financial crisis.

"Considering the chaotic situation in many parts of the world and the economic costs of those restrictive measures on trade, investment, consumption and travel, this is evolving into a 'self-induced' global recession.

"Being a small and open economy, Singapore will not be spared," he said.

Mr Seah said a second stimulus package of up to $14 billion to $16 billion could be rolled out, funded by the remaining Budget surplus for this term of government of about $7.7 billion, and an additional $6 billion to $8 billion from the reserves.

A $4 billion Stabilisation and Support Package was announced during the Budget statement last month.

He expects the Monetary Authority of Singapore to take an aggressive response by potentially allowing the currency to weaken amid the risk to growth.

Mr Seah said he expects year-on-year contractions in the first three quarters before an improvement at the end of the year. He noted that the global situation has deteriorated sharply in recent weeks.

Travel restrictions imposed by Singapore have been broadened beyond China to cover markets accounting for about 69 per cent of Singapore's total tourist arrivals last year, he said.


He expects this to hit tourism-related services and weaker global demand to dent Singapore's exports and the manufacturing sector.

Maybank Kim Eng senior economist Chua Hak Bin said Singapore's economy has already been dealt a blow by the collapse in demand and tourism as well as supply chain disruption from China.

"That was the first shock. The second shock was the spread of the disease to Europe and the US, which are large consumer markets for Singapore," he said.

"The third shock is the spike in cases in Asean which is forcing some of our neighbours to impose partial lockdowns... If two of our closest neighbours are taking draconian measures that will affect their economies, ours will be affected as well."

Mr Khoon Goh, head of Asia research at ANZ in Singapore, said the bank has revised its forecast for GDP growth this year and expects it to contract by 0.6 per cent.

Other economists are still expecting the economy to grow over the year, for now.

OCBC Bank chief economist Selena Ling said the bank's latest forecast for Singapore's full-year GDP growth is 0.3 per cent.

United Overseas Bank's growth forecast for this year is 0.5 per cent, though there are further downside risks, said the bank's economist Barnabas Gan.