SINGAPORE (Reuters) – A recession in Singapore’s trade-reliant economy could be deeper than forecast as the protracted nature of the COVID-19 pandemic is likely to hamper a decisive rebound in global activity, the city-state’s central bank said on Tuesday.
“There remains significant uncertainty over the severity of the downturn, as well as the eventual recovery,” the Monetary Authority of Singapore (MAS) said in its semi-annual macroeconomic review.
“The materialisation of downside risks … could tip the growth outcome in Singapore below the forecast range.”
Singapore’s current forecast for GDP is –4% to –1%, but growing risks to the outlook include more stringent measures to contain the spread of the coronavirus in Singapore and around the world, the central bank said.
It also flagged the collapse in crude prices, with oil-related industries such as marine and offshore engineering and petroleum refining accounting for up to 4% of Singapore’s GDP.
The MAS eased monetary policy last month as the economy faces its worst recession in its 55-year history.
The COVID-19 pandemic knocked Singapore’s economy in the first quarter, when it shrank 2.2% – its sharpest contraction since the 2009 financial crisis.
Singapore has among the highest number of infections in Asia and has extended virus-fighting curbs, which include the closure of most workplaces and schools until June 1. The measures were initially set to run for a month until May 4.
The virus has infected more than 14,000 people in the city-state and killed 14. Globally over 3 million people have been infected, while the death toll has crossed 210,000.
The MAS said GDP will contract even more in the second quarter due to the severity of the outbreak in Singapore’s major trading partners, as well as the strict measures to curb transmission domestically.
Unemployment is also likely to rise and wages drop, a factor contributing to deflation in both core and headline prices in 2020 for the first time since 2002, the central bank said.
Despite the grim outlook, the economy had not experienced significant capital outflows or unusual funding stresses, MAS added.
(Reporting by Aradhana Aravindan in Singapore; Editing by Himani Sarkar)