Singapore’s recovery prospects were dampened by the coronavirus, or COVID-19, pandemic as it has undermined spending as well as production, the central bank said Tuesday.
GDP growth forecast range was downgraded and widened, to -4.0 to -1.0 percent from -0.5 to 1.5 percent previously, the Monetary Authority of Singapore said in its biannual Macroeconomic Review.
The signing of the US-China phase 1 trade deal and nascent signs of a turnaround in the global electronic cycle were expected to lift Singapore’s growth in 2020.
However, now the prospects of the city-state hinges on the course taken by the COVID-19 pandemic, the bank noted.
As an economy heavily reliant on international trade, Singapore is particularly susceptible to a fall-off in external demand. Consequently, trade-related services face challenging circumstances.
Moreover, the containment measures taken to contain the spread of the virus had a substantial impact on the domestic-oriented sector.
Further, the central bank observed that wages, rather than employment, will bear the brunt of the negative shock in the near term. Firms are likely to reduce labor costs via reductions to wages and headcount.
MAS observed that inflation will fall further as the impact of the covid-19 broadens. Core and headline inflation measures are expected to return negative this year, the first such occurrence since 2002.
In March, the central bank had eased its monetary policy as the city-state was expected to enter a deep recession.
To mitigate the downturn caused by the pandemic, the government has unveiled stimulus worth around S$60 billion since February, which included wage subsidies and cash payout.
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