Singapore is projected to sink deeper into recession in 2020 than expected before, as the Covid-19 pandemic has left the global economy battered.

GDP projected to contract by 4 to 7 per cent

The Ministry of Trade and Industry (MTI) said on Tuesday (May 26) that Singapore’s GDP growth forecast for 2020 has been revised downwards to "-7.0 to -4.0 per cent".

The Singapore economy contracted by 0.7 per cent on a year-on-year basis in the first quarter, a reversal from the 1 per cent growth in the previous quarter but better than the predicted 2.2 per cent drop earlier estimated.

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy shrank by 4.7 per cent in the first quarter.

Factors causing weakened S'pore economy

Against this backdrop, the outlook for the Singapore economy has weakened further since March.

Outward-oriented sectors such as manufacturing, wholesale trade and transportation and storage will be adversely affected by the sharper-than-expected slowdown in many of Singapore’s key markets, as well as more prolonged supply chain disruptions.

Circuit breaker measures implemented to curb the spread of Covid-19 in Singapore have also dampened domestic consumer activity.

Retail and food services have been negatively affected by the circuit breaker measures, said MTI.

Firms across several sectors that cannot operate fully from home have also been working under reduced capacity as a result of the workplace closures and the fall in demand.

Sectors such as construction and marine and offshore engineering have also been severely affected by manpower shortages due to the outbreak of infections among foreign workers, especially those living in foreign worker dormitories.

MTI said a gradual recovery is only expected to start taking shape in the second half of the year.

"Pockets of resilience" in the economy

However, some parts of the economy have remained resilient.

The biomedical manufacturing cluster is expected to expand, supported by the production of pharmaceutical and biological products during this period.

Among services sectors, the information and communications sector is also projected to grow, due to the large demand for IT and digital solutions.

Uncertainties in global economy

MTI highlighted in March that the escalation of the Covid-19 outbreak worldwide had led to a significant deterioration in the external economic environment.

Since then, the disruptions to economic activity in major economies around the world have been more severe than expected.

In its April review, the International Monetary Fund (IMF) projected that the global economy would contract by 3 per cent in 2020, with most of the major advanced and emerging economies expected to see full-year recessions.

There is also a risk that subsequent waves of infections in major economies such as the U.S. and Eurozone may further disrupt economic activity.

The downturn in these economies could be more severe and prolonged than expected if infections start to rise and strict measures such as lockdowns and movement restrictions are imposed again.

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