DBS expects Singapore GDP to shrink 5.7% instead of 2.8%
Retrenchments may spike to 45,600, says the bank, as pandemic takes its toll
Singapore's decision to keep a large segment of its economy closed and many of its residents at home for another month will lower economic growth and raise job losses, said analysts.
DBS Bank became the latest to cut its estimates of how Singapore's gross domestic product (GDP) and employment would pan out this year, after earlier downgrades by OCBC Bank, United Overseas Bank Group and Maybank.
DBS now expects the economy to shrink 5.7 per cent this year, a far steeper fall than the 2.8 per cent drop it predicted earlier.
Retrenchments may spike to 45,600, far higher than any of the past recessions, while the resident unemployment rate could rise to a seasonally adjusted 4.2 per cent, the bank said.
Should Singapore fail to contain the outbreak by the end of the circuit breaker on June 1, the GDP could shrink by as much as 7.8 per cent, said the bank's senior economist Irvin Seah in a report yesterday.
The circuit breaker was extended after a spike in infections at dormitories housing foreign workers. The tighter new measures will take a heavier toll on businesses already struggling with poor earnings and weak cash flows, DBS said.
The Government has offered more help to businesses and their employees, taking the total fiscal response to the pandemic to $63.7 billion.
SERVICES, CONSTRUCTION
Without government help, the economic pain could have been even more acute, Mr Seah noted. Services and construction are two sectors that will be hardest hit by the circuit breaker extension.
"The extension to June 1, though necessary to contain the outbreak, will be a nail in the coffin for many locally oriented industries, for example, construction, retail, F&B, business services," he said.
The relief measures will help, but some businesses on a weaker financial footing may not survive this crisis - implying a spike in companies folding, bankruptcies and job losses ahead. Companies may have to shed more headcount to bring manpower costs in line with the fall in earnings.
Though resident workers account for about 62 per cent of the total workforce, proportionately fewer local workers are likely to be retrenched on account of policy measures aimed at safeguarding their jobs.
While foreign workers will account for the bulk of the retrenchments, resident unemployment will still rise.
DBS' GDP growth estimates for the year are now lower than government guidance of minus 4 per cent to minus 1 per cent. Other banks have also made their GDP predictions - some of which are more dire than DBS' while others are rosier.
OCBC expects Singapore to suffer an even more severe recession. Ms Selena Ling, OCBC's head of research and strategy, said a contraction of 6 per cent to 10 per cent cannot be ruled out for the year.
UOB economist Barnabas Gan downgraded Singapore's growth to minus 4 per cent, from a previous estimate of minus 2.5 per cent.
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