Singapore is one of the smallest independent countries in the world. Nevertheless, Singapore has a highly developed market economy. The country underwent a period of rapid industrialization, after which it became an important financial hub. However, the coronavirus pandemic caused serious problems for the local economy.
Unfortunately, Singapore’s economy entered a technical recession after shrinking by 41.2% in the second quarter compared to the previous quarter. This is according to the advance estimates by the country’s Ministry of Trade and Industry.
Importantly, the latest gross domestic product computed largely from data in April and May surpassed analysts’ forecasts. Economists expected the local economy to shrink by 37.4% quarter-over-quarter.
People should take into account that a technical recession is defined as two consecutive quarters of quarter-on-quarter contraction. As a reminder, the country reported a 3.3% decline in the gross domestic product compared to the preceding quarter.
Interestingly, compared to the second quarter in 2019, the local economy contracted by 12.6% in the second quarter. This result also surpassed expectations.
The state of the local economy in the second quarter worsened as the government implemented partial lockdown measures, which the government called a “circuit breaker”. The purpose of the circuit breaker was to limit the spread of the coronavirus. These measures, which started in April, involved shutting most workplaces, except for in essential services. Additionally, the government made the decision to close all schools temporarily.
The partial lockdown measures lasted nearly the entire second quarter. The country’s government started to remove certain measures in early June.
The restrictions created serious problems for businesses relying on domestic consumption. Moreover, the external demand for goods from Singapore was also weak due to the economic impact of the coronavirus pandemic.
The local economy in the second quarter
Let’s have a look at the country’s economy. In the second quarter, manufacturing expanded by 2.5% year-on-year. Furthermore, construction fell by 54.7% compared to the same period of time last year. Services-producing industries contracted by 13.6% compared to a year ago.
Unfortunately, Singapore has one of the highest numbers of coronavirus cases in Southeast Asia. As of Tuesday, the number of cases surpassed 46,600. This number is quite high after taking into consideration the fact that less than 6 million people in the country.
Importantly, the coronavirus pandemic has the potential to drag Singapore into its worst recession this year. Based on the information provided by the country’s government, the annual contraction could reach between 4% and 7% in 2020.
However, Singapore’s government is actively working to boost the economy. The country presented four stimulus packages, totaling about 100 billion Singapore dollars ($70.4 billion), so far this year.