DBS expects S'pore economy to shrink by 0.5% this year

A recession in Singapore “appears inevitable”, said DBS Bank as it now sees the economy shrinking by 0.5 per cent this year, instead of the 0.9 per cent growth it forecast last month.

Several other economists also have grim outlooks for the year.

The downgraded forecast still comes with significant downside risks should the coronavirus outbreak worsen further, DBS Bank economist Irvin Seah said in a research note yesterday.

He also expects total retrenchments for the year to reach about 24,500, slightly above the 23,430 in 2009 during the global finan-cial crisis.

“Considering the chaotic situation in many parts of the world and the economic costs of those restrictive measures on trade, investment, consumption and travel, this is evolving into a ‘self-induced’ global recession. Being a small and open economy, Singapore will not be spared,” he said.

Mr Seah said that a second stimulus package of up to $14 billion to $16 billion could be rolled out, funded by the remaining Budget surplus for this term of Government of about $7.7 billion, and an additional $6 billion to $8 billion from the reserves.

A $4 billion Stabilisation and Support Package was announced during the Budget statement last month.

He also expects the Monetary Authority of Singapore (MAS) to take a more aggressive monetary response – potentially allowing the currency to weaken amid the risk to growth.

“In fact, an announcement before the next scheduled policy meeting around mid-April should not come as a surprise given the urgency of the matter,” he said.

Mr Seah said that he expects year-on-year contractions in the first three quarters before an improvement at the end of the year.

He noted that the global situation has deteriorated sharply in recent weeks.


This is evolving into a ‘self-induced’ global recession. Being a small and open economy, Singapore will not be spared.



If two of our closest neighbours are taking draconian measures that will affect their economies, ours will be affected as well.


Travel restrictions imposed by Singapore have been broadened to an “unprecedented” scale, he said.

He expects this to hit tourism-related services and weaker global demand to dent Singapore’s exports and the manufacturing sector.

He said Singapore’s downturn this year will be a lot deeper than that during the severe acute respiratory syndrome outbreak in 2003, and more painful than the global financial crisis in 2009. In those two downturns, Singapore still managed to post gross domestic product (GDP) growth of 4.5 per cent and 0.1 per cent, respectively.

Maybank Kim Eng senior economist Chua Hak Bin said Singapore’s economy was already dealt a blow by the collapse in demand and tourism, as well as the supply chain disruption from China.

“That was the first shock. The second shock was the spread of the disease to Europe and the US, which are large consumer markets for Singapore,” he said.

“The third shock is the spike in cases in Asean which is forcing some of our neighbours to impose partial lockdowns… If two of our closest neighbours are taking draconian measures that will affect their economies, ours will be affected as well,” he added.

Mr Khoon Goh, head of Asia research at ANZ in Singapore said yesterday that the bank has revised its forecast for GDP growth this year and expects it to contract by 0.6 per cent.

Other economists are still expecting the economy to grow over the year, for now.

OCBC Bank chief economist Selena Ling said the bank’s latest forecast for Singapore’s full-year GDP growth is 0.3 per cent.

She added that this will be reassessed based on GDP growth data for the first quarter of this year, which will be released next month, the upcoming second fiscal stimulus package, MAS’ expected monetary policy easing, and whether Malaysia will extend its movement control order beyond March 31.

United Overseas Bank’s growth forecast for this year is 0.5 per cent, though there are further downside risks, said the bank’s economist Barnabas Gan.

The official government forecast for GDP growth this year is minus 0.5 to 1.5 per cent.

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