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S’pore Has Entered Technical Recession; Here’s What That Means for S’poreans

2020-07-15 , 11:46 am

If you’ve taken a look at the news recently, you would have seen headlines that said that Singapore has entered a technical recession.

You click in, and all you see are a bunch of technical terms thrown around that you don’t really understand.

But don’t worry, because, within this article, I will be simplifying everything for you and telling you how it’ll affect us Singaporeans.

Technical Recession

First off, a technical recession is used to describe two consecutive quarters of a year going through an economic contraction.

Huh?

This means that our economy has shrunk for about six months now, and things aren’t getting any better.

So how do we measure economic growth?

We do so by looking at the Gross Domestic Product (GDP), which is essentially the market value of all the final goods and services Singapore makes in a year.

When we compare the first quarter of the year and the second quarter of the year, our GDP decreased by 41.2%. And if we compare last year and this year, our GDP decreased by 12.6%.

Our GDP is now in the negative and that’s not good.

I’m sure you are all clear that the shrinking economy is the result of the COVID-19 pandemic, which caused many businesses to cease operations. So let’s take a look at how it has affected our construction, retail, and tourism sectors in detail.

Construction Sector

The construction sector has been affected the most as seen from a 54.7% contraction as compared to last year. It suffered a 95.6% contraction from the first quarter to the second quarter.

From January to March when the number of COVID-19 cases wasn’t as high, buildings and roads could still be constructed.

However, from April to June, the circuit breaker was in place. Our whole country was in a locked-down state and most of us couldn’t go anywhere unless we were essential workers. This, of course, also included the foreign workers. Many construction activities were stopped during this period.

There were also many movement restrictions imposed at foreign worker dormitories. As such, there were disruptions to the manpower distribution for construction.

With not many construction activities taking place, it is no wonder that the sector would contract that much.

Services Sector

The services sector saw a 13.6% contraction when compared to last year and saw a 37.7% drop from the first quarter to the second.

Many restaurants were not allowed to let customers dine-in, so the only way that they could survive was to provide takeaway or delivery services for their food.

Instead of ordering food all the time through delivery apps, more Singaporeans started eating home-cooked food because it was cheaper to buy groceries and cook the meals themselves. This resulted in a smaller customer base for many of the food retailers in Singapore.

Retail businesses also took a hit after they were ordered to close their shops during the circuit breaker.

Tourism Sector

When the COVID-19 situation worsened across the world, we saw more and more borders closed for fear that the COVID-19 virus would continue to spread.

Initially, people were told to defer non-essential travel. This meant that those who had to go on business trips were still allowed to leave the country. However, as time went on, all forms of travel were no longer allowed. Singapore, too, closed its borders and advised everyone against travelling.

With a sudden decrease in the number of people flying in and out of Singapore, it is obvious that our tourism sector would be hit quite badly as well.

What That Means For Singaporeans

According to one of our MPs, Patrick Tay, the GDP figures for the past two quarters are quite bad and they paint a “sombre and worrying outlook for the Singapore economy for the rest of 2020”.

As such, he urges everyone who is working to brace ourselves for a “rough ride ahead”. He also predicts that after the labour market figures for the second quarter are released at the end of this month, there will be a surge in the number of retrenchments and unemployment figures.

Now that the circuit breaker has ended and we’ve entered phase 2 where more businesses have resumed, hopefully, we would be able to spend more using the cash payouts that the government has given us and help our economy to recover in the third quarter of this year.

And don’t worry, there will be a revised version of the second-quarter estimates to reflect the impact of the end of phase 2. It will be released in August and hopefully, it will be more positive than what we see now.

Let’s pray for the best.

Now that you know we have to pull through the recession together, you might as well just watch our latest video whereby we simplify what TraceTogether is here: