Private-sector economists expect Singapore economy to contract 5.8% this year

PRIVATE-SECTOR economists expect Singapore's full-year gross domestic product (GDP) to decline by 5.8 per cent in 2020, with an 11.8 per cent year-on-year contraction in the second quarter, according to findings from the latest Monetary Authority of Singapore (MAS) survey of professional forecasters released on Monday.

The Covid-19 pandemic has sent expectations south since the previous quarterly survey sent out in February, when the median forecast by respondents was for full-year GDP growth of 0.6 per cent. But respondents foresee recovery in 2021, with the economy projected to expand 4.8 per cent next year.

Sent out on May 26, the latest survey received responses from 23 economists and analysts. It does not represent MAS's views or forecasts.

Expectations did improve for manufacturing - with a median full-year forecast of 2.2 per cent growth, up from -0.3 per cent in the last survey - and for finance and insurance, with growth forecast at 3.1 per cent, up from 2.6 per cent.

The improved manufacturing forecast could be taking a cue from better-than-expected industrial production data for March and April, "especially the silver lining in pharmaceuticals due to the global Covid-19 induced shortages", said OCBC Bank chief economist Selena Ling.

UOB economist Barnabas Gan continues to expect pharmaceutical production and exports to be a boon for Singapore's overall manufacturing and trade.

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But other predictions worsened, most dramatically for accommodation and food services where a full-year contraction of 26 per cent is now expected, compared to a 1.6 per cent fall forecast in the earlier survey.

Wholesale and retail trade is expected to shrink by 12.8 per cent, worsening from the previously-predicted 0.7 per cent fall, while respondents foresee construction declining by 11.4 per cent, versus the previously-predicted growth of 2.4 per cent.

Private consumption is forecast to fall 5.2 per cent this year, down from the last forecast of 1.9 per cent growth. Non-oil domestic exports are now predicted to be flat for 2020, as opposed to the 0.2 per cent growth earlier predicted.

The unemployment outlook has also grown gloomier, with the unemployment rate forecast to be 3.6 per cent by this year-end, up from 2.4 per cent in the previous survey.

Core and headline inflation are expected to come in at -0.3 per cent and -0.7 per cent respectively, within the official forecast range of -1 to 0 per cent for both indicators.

"Looking ahead, low oil prices and deteriorating consumer demand will likely continue to act as a drag on domestic prices," said Mr Gan. But he highlighted a possible "note of optimism" in the expectation that both growth and inflation are expected to pick up in 2021, to 4.8 per cent and 0.7 per cent respectively.

Escalation in the Covid-19 situation was again identified as the greatest downside risk to Singapore's growth outlook, followed by an escalation in trade tensions. Labour market deterioration rose in prominence as a downside risk, now cited by a third of respondents, up from 17.6 per cent in the last survey.

Conversely, the top upside risk was a containment of the Covid-19 outbreak, followed by a stronger-than-expected recovery in global economic activity, and further fiscal stimulus.