Singapore economy shrinks 2.2% in Q1, full-year growth forecast slashed to -4% to -1%: Flash data

SINGAPORE – Singapore’s economy shrank by 2.2 per cent year on year in the first quarter of 2020, based on flash estimates released by the Ministry of Trade and Industry (MTI) on Thursday (March 26).

MTI also downgraded its full-year growth forecast to a range of -4.0 to -1.0 per cent, confirming that the economy will register its first full-year recession in about two decades. The last time Singapore registered a full-year contraction of its economy was in 2001 during the Dot-Com Bust when growth fell by 1 per cent.

MTI had last estimated 2020 gross domestic product (GDP) growth within a range of minus 0.5 per cent to 1.5 per cent.

The first quarter flash estimate is much worse than a Monetary Authority of Singapore (MAS) survey of private forecasters released earlier this month that predicted the economy contracting by 0.8 per cent. It is also far deeper than the worst hit during the Sars period when the economy contracted by 0.3 per cent in the second quarter of 2003. 

MTI said the advance GDP estimates for the first quarter were computed largely from data in the first two months of the quarter.

Several banks have downgraded their GDP growth outlook for this year and expect the Singapore to post the first full-year recession in about two decades.

Source: Read Full Article

StanChart downgrades Singapore GDP growth forecast, expects recession in 2020

Standard Chartered Bank has downgraded its economic growth forecast for Singapore, saying that the economy will shrink by 2 per cent this year because of the impact of the coronavirus pandemic.

The bank expects the Monetary Authority of Singapore (MAS) to respond by easing its policy stance, allowing the local dollar to depreciate.

StanChart has cut the forecast from an earlier projection of a 0.8 per cent expansion in Singapore’s gross domestic product.

“The widening coronavirus outbreak globally and increasingly strong, but necessary, containment measures worldwide have resulted in a sharp downgrade to our global growth projections,” StanChart analysts Edward Lee, Divya Devesh and Jonathan Koh said in a report issued today (March 23).

The containment measures that may hurt growth include the recent restriction of all short-term visitors from entering or transiting via Singapore and the travel and movement restrictions imposed by Malaysia.

The collapse in oil prices and ongoing financial market volatility will also negatively impact relevant sectors in Singapore, the report said.

Oil prices dropped by about 50 per cent from US$50 per barrel on March 6, when an oil production deal between Saudi Arabia and Russia collapsed.

Meanwhile, stocks and bond markets swung sharply as several countries imposed lockdowns to contain the spread of the disease.

“We now expect the MAS to shift the slope of the Singapore dollar nominal effective exchange rate (SGD Neer) policy band to flat from +0.5 per cent per annum currently and also re-centre the SGD NEER policy band lower,” the bank said.

StanChart also expects the MAS to shift the centre of its policy band to the prevailing SGD Neer level, now estimated at about 1.7 per cent below the middle of the band.

The Singapore dollar is likely to depreciate to about 1.47 against the US dollar and a re-centring lower of the policy band would open further room for SGD Neer weakness in the coming months, it said.

The bank has, however, raised its 2021 GDP growth forecast to 2.8% from 1.9% due to a more favourable base effect and considerable amount of fiscal and monetary stimulus implemented globally.

Source: Read Full Article

Japan economy shrinks faster than first estimated in Q4 as coronavirus compounds recession risks

TOKYO (REUTERS) – Japan’s economy shrank faster than initially estimated in the fourth quarter on a bigger decline in business spending, casting a deeper shadow over the outlook as the coronavirus hit production and heightened recession risks.

The economy is under growing pressure as the outbreak disrupts supply chains and damages tourism, which follows the hit to consumption after October’s sales tax hike.

The deeper contraction and the virus have fueled fears Japan could see growth contract for two straight quarters in the current quarter, defined as the technical recession, piling pressure on policymakers to deploy further stimulus steps.

The economy shrank an annualised 7.1 per cent in October-December, the biggest fall since April-June 2014 and weaker than the preliminary reading of a 6.3 per cent annualised contraction, Cabinet Office data showed on Monday. The reading compared with economists’ median forecast for a 6.6 per cent fall.

Capital spending dropped 4.6 per cent from the previous quarter, worse than a preliminary 3.7 per cent decline and compared with the median forecast for a 4.3 per cent fall.

Business expenditure has been a lone bright spot in Japan’s fragile economy, led by investment in technology to cope with a labour shortage, however, analysts warn the coronavirus is now hurting appetite for such spending.

Private consumption fell 2.8 per cent from the third quarter, roughly in line with the preliminary 2.9 per cent decline.

In addition to the sales tax hike last October, a warmer winter sapped demand for seasonal items such as clothes.

The government plans to compile a second package of emergency measures to deal with the virus on March 10, which includes zero-interest loans to companies hit by the epidemic.

Prime Minister Shinzo Abe has come under fire for his handling of the crisis as the number of coronavirus cases in Japan reached over 1,100, just as the nation prepares to host the summer Olympic Games in July and August.

Growing recession fears have also added pressure on the Bank of Japan to underpin the fragile economy despite its dwindling ammunition.

Capital expenditure will be a key focus for the central bank as it weighs options to reduce the fallout from the widening coronavirus outbreak, sources told Reuters.

Source: Read Full Article