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ANZ cuts Singapore's 2020 growth outlook to 0.4%

ANZ has become the latest bank to downgrade Singapore’s 2020 economic forecast, no thanks to the impact of the Covid-19 outbreak that has spread across the globe.

Gross domestic product (GDP) growth could be just 0.4 per cent, according to Khoon Goh, ANZ’s head of Asia research, against his earlier projection of 1.5 per cent.

The Ministry of Trade and Industry earlier this week lowered its official forecast to between -0.5 per cent and 1.5 per cent, with a base expectation around the mid-point of 0.5 per cent.

ANZ’s Mr Goh wrote in a report on Thursday that “public consumption will play a strong role, and the fiscal support will prevent a larger slowdown in private consumption”, as the latest Budget measures kick in to help the economy keep its head above water in 2020.

Even so, he believes that Singapore’s economy will take a significant hit in Q1 2020 - not just from the toll on tourism-related sectors, which will be the worst off, but also the toll of reduced external demand and supply chain disruptions on factories.

Calling the first quarter “a write-off”, Mr Goh expected growth in the three months to contract by 1 per cent year on year, for the first time in negative territory in more than a decade.

On top of the projected 0.6-point hit to the GDP from a plunge in visitor arrivals, lower industrial output and a decline in the transport and storage sector - where shipping activity has been a casualty of Chinese factory shutdowns - could take off another 0.8 percentage point, he said.

“We have factored in only a modest recovery in Q2, with a strong rebound in the second half of the year. However, there is a lot of uncertainty around the timing of the recovery,” he added.

“This will be the second year in a row that economic growth is well below potential. We expect a stronger recovery in 2021 as activity normalises.”

Meanwhile, Standard Chartered cut its global growth forecast from 3.2 per cent to 3 per cent, as China was downgraded on the delay to business resuming after the Chinese New Year.

“We expect monetary and fiscal policy support to cushion the negative coronavirus impact,” Singapore-based economists David Mann and Jonathan Koh said in a note on Thursday. “It cannot, however, fully compensate for the deadweight loss to growth that is likely in Q1 2020.”

The StanChart research team suggested just the day before that Singapore manufacturing could return to growth from April onwards, as “we expect the re-routing of intermediate-goods imports to support manufacturing activity”, in a report on Wednesday.

Still, it has already lowered its growth outlook for Singapore to 0.8 per cent, from 1.4 per cent.

OCBC Bank recently stuck to its GDP forecast range of zero to 1 per cent growth in 2020.

But Maybank Kim Eng downgraded its expectations to 1.1 per cent, from 1.8 per cent before, and Citi moved its forecast into the 0.5 per cent to 1 per cent range, down from 1.3 per cent previously, while United Overseas Bank narrowed its projection to 0.5 per cent.