GDP growth forecast dips to -2.8% amidst COVID-19 pandemic

Three main sectors of the economy fell due to the escalating outbreak in the country.

Singapore's 2020 GDP growth forecast is -2.8% or 3.8 percentage points (ppt) lower than the previous estimate of 1%, reflecting the downside risks for Singapore’s economy following the spread of the COVID-19 pandemic, according to Fitch Solutions report.

The three main sectors of the economy, accounting for close to half of GDP, weigh heavily on Singapore’s economy. Services, manufacturing, and construction sectors all fell due to severe disruptions to travel and tourism and the difficulty of sustaining construction work amidst an escalating COVID-19 outbreak in Singapore.

On top of the expansionary budget announced in February, the government is expected to mount a policy response, with the possibility of borrowing against past reserves to fund stimulus measures. These measures will further stem job losses and maintain a baseline of business activity and confidence during the pandemic.

Economy is expected to worsen in Q2 2020 against the advance estimate of a 2.2% contraction in Q1 2020, before a slow recovery takes place closer to Q4 2020.

Fitch notes that downside risks to the forecast should be expected given the possibility of a worsening outbreak in Singapore and the risk of global pandemic not being contained within a quarter.

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