Singapore faces its sharpest contraction since independence after the city-state warned that its economy could shrink by 7 per cent in the wake of the coronavirus pandemic.
After initially winning international praise for its efforts to control the spread of the virus, the number of cases in Singapore has soared.
The infection rate among the 323,000 migrant workers living in dormitories, who have driven the surge in coronavirus patients, is now approaching 10 per cent.
There are 32,343 cases in Singapore, one of the highest rates on a per capita basis in Asia. Dormitory residents account for more than 90 per cent of total infections.
The virus is dragging down the economy. The Ministry of Trade and Industry said on Tuesday that it expected gross domestic product to fall between 4 per cent and 7 per cent in 2020. It had previously projected a contraction of between 1 per cent and 4 per cent.
“The outlook for the Singapore economy has weakened further since March,” the MTI said.
“Notwithstanding the downgrade, there continues to be a significant degree of uncertainty over the length and severity of the Covid-19 outbreak, as well as the trajectory of the economic recovery, in both the global and Singapore economies.”
If GDP growth contracts by 5 per cent or more this year, it would mark the steepest fall since Singapore’s independence from Malaysia in 1965.
“It is almost certain that it’s going to be the worst [drop since independence], short of a miracle or a vaccine very soon,” said Chua Hak Bin, senior economist at Maybank.
Heng Swee Keat, the finance minister, on Tuesday announced a fourth support package of S$33bn (US$23bn) involving relief measures for businesses and households after Singapore’s small, open economy was buffeted by a lockdown. The country’s four support packages total almost S$100bn, or nearly 20 per cent of GDP.
Sectors including construction — which relies heavily on migrant workers — transportation, wholesale and retail trade all shrank in the first quarter of the year. The accommodation and food services sector contracted by an annualised 69.9 per cent from the previous three months, its biggest fall on record.
“Singapore does not have a domestic tourism market,” said Mr Chua. “Ultimately any kind of lift-off, especially for hospitality and aviation, will require a relaxation of border controls which is the most difficult part of this exit from lockdown.”
But Mr Chua added that the expansion in biomedical manufacturing, finance and insurance in the first quarter suggested that those sectors could help offset the “negative hit” from the shutdown.
Singapore will gradually reopen schools and select businesses on Tuesday. Companies in sectors such as finance, insurance and logistics that meet safety requirements may reopen next month, while businesses including retail shops or entertainment venues will remain closed for at least another four weeks.