Singapore slumps into recession with record 41.2% GDP plunge

Singapore’s economy plunged into recession last quarter as an extended lockdown shuttered businesses and decimated retail spending.

Gross domestic product declined an annualized 41.2% from the previous three months, the Ministry of Trade and Industry said in a statement Tuesday, the biggest quarterly contraction on record and worse than the Bloomberg survey median of a 35.9% drop. Compared with a year earlier, GDP fell 12.6% in the second quarter, versus a survey median of -10.5%.

The deepening slump reflects the knock Singapore’s economy is taking from all sides amid the pandemic. A plunge in global trade has hit the export-reliant manufacturing industry, while retailers have seen a record decline in sales.

It also puts added pressure on the ruling People’s Action Party, which had its weakest performance ever in last week’s election. The government has already pledged about S$93 billion ($67 billion) in stimulus to shore up troubled businesses and households and to prevent a surge in retrenchments.

The record slump last quarter was mainly due to partial lockdown measures implemented from April 7 to June 1 to slow the spread of Covid-19, as well as weak external demand, the MTI said.

Other key details of Singapore’s GDP report, based on annualized quarter-on-quarter data:

• Manufacturing plunged 23.1% compared with growth of 45.5% in the previous three months
• Construction plummeted 95.6%
• Services shrank 37.7% with airlines, hotels and restaurants restricted during the lockdown
• The government, which previously projected a full-year contraction of 4%-7%, didn’t provide a new forecast on Tuesday

Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore, said the quarterly drop was probably the bottom of the cycle “unless Singapore is forced to regress to the harsher iteration of circuit-breaker measures.” Additional stimulus isn’t ruled out, though “the four fiscal packages need time to permeate and cascade,” he said.

Singapore’s dollar slipped 0.1% to S$1.3920 against the U.S. dollar as at 8:21 a.m. local time.

The GDP release provides a window on how deep a recession other Asian economies are likely to face. Thailand’s official forecast of an 8.1% contraction this year is the worst in the region, while others like India and Indonesia are facing a surge in virus cases that’s exacerbating economic woes.

Factory purchasing managers indexes show that manufacturing across Asia started to pick up at the end of the second quarter, with many governments allowing early phases of re-opening that are rejuvenating demand.

Singapore’s advance GDP estimates are computed largely from data in the first two months of the quarter, and often are revised once the full quarter’s data are available.