Singapore downgrades GDP forecast to 0.5 pc due to coronavirus outbreak

Singapore has downgraded its gross domestic product (GDP) forecast for 2020 to around 0.5 per cent, the mid-point of a new estimated range of (-)0.5 per cent to 1.5 per cent on Monday, citing impact of the ongoing coronavirus outbreak.

The previous forecast range announced last November was 0.5 per cent to 2.5 per cent. Singapore's economy grew at a decade-low of 0.7 per cent last year.

Singapore has so far confirmed 75 cases of the coronavirus with authorities earlier this month raising the Disease Outbreak Response System Condition (DORSCON) to Orange, Channel News Asia reported on Monday.

Last week, Prime Minister Lee Hsien Loong warned that the coronavirus outbreak will have a significant impact on the local economy for the next couple of quarters.

Making the GDP forecast on Monday, the Ministry of Trade and Industry (MTI) said the outbreak of coronavirus has affected many countries around the world, including Singapore, and is likely to dampen the growth prospects of China and those impacted.

MTI also cautioned that a sharper-than-expected economic slowdown in China due to the virus outbreak will adversely affect global trade and economic growth.

It added that at the same time, other uncertainties in the global economy, such as the US-China trade war and geopolitical tensions in the Middle East, remain.

As a result, the outlook for Singapore's economy has weakened since its last review in November, the ministry said adding that the ongoing virus situation could impact the local economy through several channels.

First, the outward-oriented sectors, such as manufacturing and wholesale trade, will be affected by the weaker growth outlook in several of Singapore's key final demand markets, including China.

Firms in these sectors could also be affected by supply-chain disruptions arising from prolonged factory closures and labour shortages in China.

Second, there has been a sharp fall in tourist arrivals, particularly from China, and this has badly affected the local tourism and transport sectors.

Third, domestic consumption is likely to decline as locals cut back on shopping and dine-out activities. This will adversely affect firms in segments such as retail and food services, the ministry said.

"As the COVID-19 (coronavirus disease) situation is still evolving, there is a significant degree of uncertainty over the length and severity of the outbreak, and hence its overall impact on the Singapore economy," MTI permanent secretary Gabriel Lim said at a press conference.

The hit on GDP growth is likely to be felt during the first two quarters of the year, he added.

The ministry has emphasised that while its latest GDP forecast range includes the possibility of a recession, that is not its central scenario and its baseline view is for the economy to see positive growth at around 0.5 per cent for 2020.

MTI said it will continue to monitor developments and their impact on the Singapore economy closely.