I woke up with today’s headline in South China Morning Post, Singapore’s economy shrinks over 40% in Q2, entering recession. Financial Times’ title reads Singapore GDP shrinks a record 41.2% in second quarter.
When >
Based on advance estimates, the Singapore economy contracted by 12.6 per cent on a year-on-year basis in the second quarter of , due to the Circuit Breaker (CB) measures that were implemented from 7 April to 1 June to slow the spread of COVID-19, which included the suspension of nonessential services and closure of most workplace premises, as well as weak external demand amidst a global economic downturn precipitated by the COVID-19 pandemic. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy shrank by 41.2 per cent in the second quarter.
An illustrative calculation makes the data clearer:
Downside case
19"
19"
19"
19"
20"
20"
20"
20"
21"
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
GDP
100
100
100
100
100
87
78
70
63
Y-on-y growth
-0.3%
-12.6%
-21.6%
-29.7%
-36.8%
Q-on-q growth
-0.3%
-12.4%
-10.3%
-10.3%
-10.3%
Annualised q-on-q growth
-1.2%
-49.5%
Adjusted annualised q-on-q growth
-3.3%
-41.2%
-41.2%
-41.2%
-41.2%
Annualized data
400
400
387
365
336
299
y-on-y change
-16.1%
-25.2%
So what does the data say? Compared to Q2 in , Q2 GDP is down 12.6% on an unadjusted basis. The key cause of the decline, in addition to external macro factors, is the Circuit Breaker measures from 7 April to 1 June when the whole of Singapore was pretty much in total shutdown.
The department of statistics has not disclosed unadjusted q-on-q change ratio, but instead provided a quarter-on-quarter seasonally-adjusted annualised basis, which was widely quoted in the press at a staggering 41.2%.
Estimated quarterly change is probably around 10-12%. Even assuming such level of decline of GDP continues in the next three quarters, the annualised GDP as of the end of Q1 would be roughly 25.2% on a year-on-year basis.
Some countries have managed to get the virus under control and slowly recover from a total shutdown. Singapore is likely to take the same approach and prepare for a recovery of the economy.
The below forecasts assume a gloomy but not that gloomy outlook compared to the previous table:
Assuming a decline of 5% in Q3 and in Q4 in on a year-on-year basis, GDP for the whole of will be down 6.3%, within the range of full year forecast of -4% to -7% issued by Singapore government on 26 May.
We have to live with the new normal at the age of Covid-19 pandemic. We need to fight virus and we need to fight fake news and disinformation.
Whilst scientists are trying to figure out the long term effect of the virus, economists and policy-makers are trying to figure out impact of the virus and human behaviours during this pandemic on our economy.
The last thing we need is quality papers like SCMP and FT joining the disinformation group. After all, a lot of the readers of these papers are decision makers who can impact companies’ capital expenditure and other investment plans, including mergers and acquisitions. For these people, whatever you are reading, if you find it suspicious, it would not hurt to go back to the original source.
