Singapore economy to contract 0.6pc in Q1

27 February, 2020 12:00 AM printer

SINGAPORE: Singapore is among the major Asian economies expected to slow down significantly, halt or shrink in the current quarter as the effects of the coronavirus outbreak spread outside China, a Reuters poll found.

Singapore, a major trade partner with China, is expected to contract 0.6 per cent in the present quarter, a first since the 2009 recession after the global financial crisis, according to forecasts from economists collected between Feb 19 and 25, report agencies.

Many Asian economies, which were just limping back to growth from the spillover effects of the 18-month long US-China trade dispute, have been again dealt a blow by the outbreak, which has shut down businesses and cities. With the contagion interrupting global supply chains that most countries depend on for trade and commerce, economic activity is likely to slow, but at varying degrees. “The impact of the coronavirus on economies in Asia is potentially huge, as tourism in the region takes a beating. From deserted hotels to empty airports, the impact of this little scrap of protein and lipid on economies in the region is potentially enormous,” said Robert Carnell, chief economist and head of research for Asia-Pacific at ING in Singapore.

“If this doesn’t sound sufficiently scary, bear in mind that tourism is just one of the channels through which the coronavirus can weaken the GDP growth of Asian countries grappling with this epidemic.”

The poll showed that Australia, South Korea, Taiwan and Thailand are also expected to put in their worst performance in years in the first quarter. Only Indonesia was expected to remain relatively unscathed.

That comes on the heels of a similar Reuters poll published a little over a week ago, which found the Chinese economy will grow at its slowest pace in the current quarter since the financial crisis, with a worst-case scenario showing it at 3.5 per cent, nearly half of the 6 per cent reported in the fourth quarter of 2019.

“The base case is rapidly shifting from ‘Bad’, meaning only China is impacted, to ‘Ugly’, where both emerging Asia and developed economies see soaring infection rates and deaths,” said Michael Every, head of financial markets research for Asia-Pacific at Rabobank in Hong Kong.