Even the strong pharma production may not be enough to cushion the damage.
Following a rocky Q1, the next quarter will not be any better as it is projected to be the worst-ever in 2020 for SIngapore, given the gradual lifting of local circuit-breaker measures in June, and of lockdowns in other countries in May to June, according to Standard Chartered.
Accommodation and food services are expected to continue in being the hardest-hit sectors in Q2. Transportation and storage, wholesale and retail and construction sectors are also projected to sink.
Meanwhile, the information and communication services and the financial services sectors are likely to perform better, thanks to increasing demand as people remain confined to their homes.
The positive outlook on the manufacturing sector is also likely to offset declines, driven by the strong pharmaceuticals sector. However, the report noted the results of the Economic Development Board’s Q2 business expectations survey where 76% of pharma firms anticipate a poorer outlook for the same quarter. These results are said to be the most pessimistic outlook since the series began in 2003.
“The H2 recovery is likely to be tepid. Restrictions are being eased only gradually around the world. And the hit to growth in Q2 may carry over to H2, dampening consumption and investment sentiment,” said Edward Lee, chief economist for ASEAN and South Asia at Standard Chartered.
He also warned that increasing geopolitical noise poses another growth risk, even with highly supportive monetary and fiscal policy globally. There is still the risk of a recurrence of coronavirus infections and even if there are any subsequent restrictions in Singapore less strict than the first round, such a recurrence would delay the return to economic normalcy, Lee added.
However, Lee added that the current events will have a positive turn once a vaccine becomes available, leading to a positive YoY GDP growth for Singapore in Q4. “Our pessimistic scenario assumes a recurrence of infections and the re-imposition of partial, targeted restrictions in Q3, resulting in a large contraction in the quarter,” Lee concluded.
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