Singapore’s 10% hit is pretty standard for a crisis


A TINY country that’s long been the barometer of global commerce is sending up distress flares. How big a blow the Covid-19 pandemic inflicts on Singapore’s economy will depend much on events outside its control.

GDP fell an annualised 10.6% in the first quarter (1Q), the Singapore government reported yesterday in an advance reading. That’s worse than many economists — already bracing for a bad number — had forecast. Officials project a contraction of 1% to 4% for the year; GDP hasn’t hit that lower boundary since Singapore split from Malaysia five decades ago.

As grim as all this sounds, Singapore’s economic performance since January has echoes in the swings of global and regional capitalism. The city-state took a big hit during the Asian financial crisis, the aftermath of the Sept 11 terrorist attacks (which also constrained international travel) and in the Great Recession.

Growth shrank 10% in the 1Q of 1998 as regional markets cratered and neighbouring Indonesia seethed with political upheaval. It contracted 10% from April to June in 2001 and 8.6% the following quarter. In the 1Q of 2009, the economy declined 9.9%. Singapore pulled through, as did the world, despite what many called “unprecedented” crises.

To be sure, yesterday’s numbers are inauspicious, particularly in a landscape cluttered with downgrades. Few economists anticipate the pandemic causing anything less than a global recession.

Morgan Stanley tips a drop of 30.1% in US GDP during the 2Q; Goldman Sachs Group Inc expects a dip of 1% for the world in 2020.

But there’s plenty Singapore is doing to stave off the worst of outcomes. The government, praised at home and abroad for its response to the virus, has been frank with its citizens, and has responded with ample fiscal stimulus and the promise of more to come.

An easing by the central bank appears all but certain next week. The mix of fiscal and monetary policy is correct.

For a city reliant on tourism, Singapore’s steps to curb the flow of people also show seriousness. Short-term visitors have been barred, while citizens and residents returning are required to self- isolate. Bars and cinemas will close.

Yet schools remain open and there’s no lockdown or state of emergency resembling that in Malaysia, the Philippines or parts of Indonesia. Authorities are trying to thread the needle. To its credit, the death toll is among the lowest in the Asian region.

Since its inception, Singapore has been a locus of capital flows, trade and international labour markets. What happens to the world’s major commercial powers is often reflected in its economic data. With much of the global economy powering down, it will be tough for Singapore to push ahead.

This downturn is unique in that the world’s major economies have all been dented at more or less the same time. China and Japan, two of Singapore’s biggest trading partners, are trying to restart after effectively grinding to a halt. Whether the US is open for business next month or next quarter, America will be slower to restart than Asian powers.

In the past, bounces in the US and China’s unstoppable growth trajectory helped Singapore regain its footing. With China in a long-term slowdown before the virus outbreak, that will be difficult to replicate. But, in time, both poles will revive, albeit with scars. The tides of global economics have buffeted the city-state before. For signs of eventual recovery, look here first. — Bloomberg

  • This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.