The writing was on the wall.
Singapore’s economy contracted by 13.2% year-on-year in the 2020 second-quarter, the worst quarter on record.
The fall was on the back of the circuit breaker measures implemented from 7 April to 1 June 2020 to slow the spread of COVID-19 in our country, as well as weak external demand.
The quarterly contraction also prompted Singapore’s full-year outlook to be slashed again by the Ministry of Trade and Industry (MTI), from a fall of between 4% and 7% previously to a decline of between 5% and 7% now.
Let’s explore further.
TL;DR: Singapore’s Worst Quarter Driven By COVID-19
Highlights from Singapore’s latest quarterly results:
- In the 2020 second quarter, Singapore’s economy fell by 13.2% year-on-year, the worst quarter ever.
- This was due to the circuit breaker measures implemented for most of the quarter and weak external demand.
- Almost all sectors shrank in the April to June period, with the finance and insurance industry being the only bright spot.
- The hardest-hit sectors were construction, accommodation and food, and transportation and storage.
- The construction sector contracted 59.3% year-on-year as the industry was brought to a virtual standstill during the circuit breaker.
But Before That, What Actually Makes Up Singapore’s Economy?
In case you are wondering what makes up Singapore’s economy, let’s take a look at our gross domestic product (GDP).
For the uninitiated, GDP is the total monetary value of finished goods and services produced by a country and is an indicator of its economic health.
We will use the nominal GDP numbers from 2019 to understand more about the components of the local economy.
Definition: Nominal GDP is GDP evaluated at current market prices whereas real GDP is an inflation-adjusted measure that makes comparison between different periods more meaningful
|Industries||Percentage of Nominal GDP|
|Wholesale and Retail Trade||17.3%|
|Finance and Insurance||13.9%|
|Other Services Industries||11.3%|
|Transportation and Storage||6.7%|
|Information and Communications||4.3%|
|Ownership of Dwellings||3.8%|
|Accommodation and Food Services||2.1%|
We can see that manufacturing makes up most of our economy, followed by wholesale and retail trade, and business services.
Collectively, the three biggest sectors took up 53% of Singapore’s 2019 nominal GDP.
A Deeper Look At Singapore’s 2020 Second-Quarter GDP
The manufacturing sector shrank by 0.7% year-on-year, after growing 7.9% in the 2020 first-quarter.
The contraction was due to lower output in transport engineering, general manufacturing and chemical clusters.
However, there were bright spots in the biomedical manufacturing, electronics and precision engineering (includes the semiconductor market) clusters.
Demand for semiconductors was better-than-expected due to the strong support from the 5G market, data centres and cloud services.
Wholesale and Retail Trade Sector
The wholesale and retail trade sector decreased by 8.2% year-on-year, worse than its 2020 first-quarter fall of 5.6%.
Weakness in the wholesale trade segment was driven by lower re-exports of machinery and equipment, as well as miscellaneous manufactured goods.
On the other hand, the retail trade segment was severely hit by weak sales as most shops were prohibited from operating at their physical outlets between 7 April and 18 June 2020.
Business Services Sector
The business services sector contracted by 20.2% year-on-year, worsening from the 3.4% decline in the previous quarter.
Real estate, professional services and other services like rental and leasing took a hit due to office restrictions during the circuit breaker period, as well as weak demand from both domestic and regional business activities.
Summing Up All Sectors
Almost all sectors shrank in the April to June period, with the finance and insurance industry being the only bright spot.
|Sector||Year-on-Year Growth Rate for 2Q 2020|
|Finance and Insurance||3.4%|
|Information and Communications||-0.5%|
|Wholesale and Retail Trade||-8.2%|
|Overall GDP Growth||-13.2%|
|Other Services Industries||-17.8%|
|Transportation and Storage||-39.2%|
|Accommodation and Food Services||-41.4%|
The hardest-hit sectors were construction, accommodation and food, and transportation and storage.
Collectively, they took up 12.5% of Singapore’s 2019 nominal GDP.
Snapshot of Singapore’s Past Worst Quarters
Singapore’s economy was almost brought to a standstill amid the circuit breaker measures implemented to slow down the spread of the coronavirus pandemic.
Tellingly, our 2020 second-quarter GDP, the worst on record, reflects that.
|Quarter (Crisis)||Year-on-Year GDP Growth|
(Global financial crisis)
|Q2 2003 (Sars)||-4.2%|
The impact from the global financial crisis (GFC) some 11 years ago was nowhere near the economic contraction brought about by COVID-19.
However, something interesting to note is that the Singapore stock market’s reaction during the COVID-19 pandemic has not been that bad compared to its reaction when the GFC struck.
During the GFC, the STI plummeted some 60% in all (it bottomed in March 2009).
What Does the Future Hold?
Barring unforeseen circumstances, Singapore’s worst quarter should be past us.
Since 2 June 2020, Singapore’s economic activities have been gradually re-starting with the circuit breaker measures lifted.
And our community cases have been suppressed.
However, we are not out of the woods, yet.
There is still a risk of localised outbreaks and the continued need for restriction measures to contain such outbreaks.
Outside Singapore, the resurgence of infections has prompted governments to pause or rollback their reopening plans.
Singapore, being an open economy, will see an impact from significant uncertainties elsewhere.
We will never know for sure when our economy will be back to pre-pandemic days and how the future will unfold.
(You guessed it right, my middle name is “Captain Obvious”)
But what we can do is to constantly learn new skills to future-proof ourselves, for example, and have a positive mindset.
As they say: This, too, shall pass.
When we look back to 2020 a decade later, we have a story to tell the younger generation.
“You know, Son, Daddy went through the worst crisis ever in my lifetime and I survived! This is what I did and you can learn from it too…”
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