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[ASEAN ISSUE #13] Effect of COVID-19 on Singapore’s Economy and Future Prospects


Effect of COVID-19 on Singapore’s Economy and Future Prospects



Singapore has a population of 5.7 million in an area that is slightly bigger than that of Seoul metropolitan city. The city-state has the highest GDP per capita of USD 63,987 (estimated in 2019), marking itself as the wealthiest nation in ASEAN. The country has been hailed for its pro-business environment and institutional system as reflected in several surveys: Singapore ranked first place in the WEF Global Competitive Index and pertained second place in World Bank’s “Ease of Doing Business Index.” It also placed fourth in Transparency International’s “Corruption Perception Index”.


With a well-structured institutional system and strategic geopolitical location, global companies view Singapore as a steppingstone into the ASEAN market. The recent passing of Hong Kong’s National Security Law has made Singapore even more attractive to global companies as an alternative for global headquarters.


Both Singapore and Korea are trade-oriented economies and in this regard, have expanded cooperation in the field of trade, investment and infrastructure. Singapore is Korea’s second partner to establish the FTA and the second biggest trade and investment partner among 10 ASEAN Member States (AMS), after Vietnam. As of 2019, bilateral trade volume recorded USD 2.92 billion and Korea’s Foreign Direct Investment (FDI) to Singapore recorded USD 3.26 billion. In addition, Singapore’s major infrastructure projects including the MRT subway system have been constructed by Korea’s construction giants such as Samsung C&T and GS E&C.


This week’s ASEAN Issue will examine the effect of COVID-19 on Singapore’s economy and the government’s recovery efforts.


Singapore Cuts Economic Forecast for the 3rd Time This Year


The novel coronavirus pandemic is severely disrupting Singapore’s economy.


Like most countries that are grappling with the COVID-19 crisis, Singapore’s GDP growth in 2020 is expected to contract more than anticipated. On 26 May, the Ministry of Trade and Industry (MTI) of Singapore downgraded the country’s 2020 GDP growth forecast range for the third time this year to -7.0% to -4.0%.


Disruption in the supply chain, reduction in global demand that cut back exports and the ‘circuit breaker’ (7 April ~ 1 June) that halted Singapore’s domestic economic activities as people remained indoors are the main reasons behind the negative forecast. Prior to the latest revision, MTI announced its first projection range of -0.5% to 1.5% on 17 February, and its second range as -1% to -4 % on 26 March.


Private institutes have also lowered Singapore’s growth projection. One of Singapore’s three major banks, the Development Bank of Singapore (DBS) lowered its previous forecast of -2.8% (26 March) to -5.7% (22 April). It further went to predict that should Singapore fail in containing the outbreak, GDP growth could plunge to as low as -7.8%. Even after the circuit breaker, DBS maintained its outlook to -5.7%, but reassured that the economy will bounce back to 3.5% growth in 2021.


Another major Singaporean bank, the Overseas Chinese Banking Corporation (OCBC) released its growth forecast as -0.5% on 24 March and -3.5% on 15 April. After the government’s decision to extend the circuit breaker, the bank projected an unprecedented negative growth range of -10.0%~-6.0% on 22 April.


Even as Singapore entered the first stage of its three-phased reopening, OCBC kept its -6.0% growth forecast due to high degree of uncertainty over the resurgence of the pandemic as well as the growing perception that fiscal and monetary policies in major economies were not as effective as they were during the 2009 global financial crisis.


Like the other two banks, the United Overseas Bank (UOB) continued to downgrade its economic projection from -2.5% in March to -4.0% in April. Another global financial firm, Citigroup Inc., lowered Singapore’s estimate growth from -6.0% to -8.5% after the government extended the circuit breaker measures until 1 June. It also analyzed that for every month the circuit breaker is extended, GDP will be further reduced by 2.0% to 2.5%.


International organizations’ economic outlooks are bleak as well. The Asian Development Bank’s (ADB) “Asian Development Outlook 2020”, published on 3 April, projected Singapore’s growth as 0.2% but slashed the forecast to -6.0% in the Report’s Supplement issue released on 18 June after reflecting the economic impact of the circuit breaker. The International Monetary Fund’s (IMF) “April 2020 World Economic Outlook”, released on 15 April, foresaw Singapore’s growth as -3.5%, which is the second lowest after Thailand (-6.7%) among 10 ASEAN Member States. However, the figure is expected to drop further if it covers the lockdown.


The decline in the global economy will continue to affect Singapore’s economy. According to World Bank’s “Global Economic Prospects” released on 8 June, the global economy will shrink to -5.2%, the lowest level in 80 years. The forecast is 7.7% point lower than the forecast in January, before the outbreak of COVID-19.


The Organization for Economic Cooperation and Development (OECD)’s global outlook that focused on two probable scenarios of the pandemic is even more pessimistic. OECD predicts that if the world succeeds in preventing a second wave of infections, the global growth will decline -6.0%, however, if the world fails to contain the pandemic, the economy will drop to -7.6%. The negative projections released by international organizations imply that any further decline of Singapore’s economy will not be a surprise.



■ S’pore First Quarter Results are Better Than Expected, Contracted by -0.7% year-on-year basis, Buoyed by Biomedical Manufacturing


Singapore’s first quarter economy contracted by -0.7 percent on a year-on-year basis. The result was better than the official estimate of a -2.2% contraction. Positive growth was recorded in manufacturing (6.6%), information and telecommunications (3.5%) and finance & insurance (8.0%) sectors. Within the manufacturing sector, growth was driven by the biomedical manufacturing, precision engineering, and transport engineering clusters which outperformed negative growth in electronics, general manufacturing and chemical clusters. The negative growth of -0.7% was primarily due to contractions in accommodation & food services (-23.8%), transportation & storage (-8.1%) and wholesale & retail (-5.8%). Construction (-4.0%) and business services sector (-3.3%) also recorded declines.


Singapore’s tourism industry has also been severely hit by heavy restrictions in cross-border travel and people movement. According to Singapore Tourism Board (STB), only 2.7 million foreigners visited Singapore in the first quarter, which is a -43.3% drop from the previous year (4.7 million) and -44.4% drop from the previous quarter (4.8 million).


In terms of trade performance, total merchandise trade increased by 0.6% year-on-year in the first quarter. Singapore’s merchandise imports increased by 2.6% (SGD 121 billion), which outweighed the decline in merchandise exports by -1.3% (SGD 127 billion).


Economic indicators such as private consumption, employment and consumer prices all plunged. Private consumption in the first quarter recorded SGD 44.4 billion, which is a -1.6% decline from the previous year. Total employment in the first quarter fell by 19,500 on a quarter-on-quarter basis that led to a rise in unemployment rate of 2.4%, which is 0.2 % point increase from previous year and 0.1% point plus from previous quarter. Unemployment rate in the first quarter was lower than those recorded during 2003 SARS (4.8%) and 2009 global financial crisis (3.3%). However, the Singapore government projects that the unemployment rate will rise to 3.5% by the end of this year. Consumer prices for food, durable goods, transportation and telecommunications showed similar growth as the previous quarter, however the rest showed reverse growths, which led the consumer price to slightly increase by 0.4% from the previous quarter (0.6%).



■ Singapore Deploys Largest Fiscal Intervention Among 10 AMS (injection of USD 100 billion, 19.2% of GDP)


To minimize economic repercussions of the ongoing pandemic, the Singapore Government announced four successive stimulus packages that sum up to SGD 92.9 billion (USD 67 billion), which is equivalent to 19.2% of the country’s GDP. The unprecedented amount of fiscal package is the largest among 10 AMS.


< Singapore’s Stimulus Package >

(Unit: SGD, S$)

Date2020 BudgetSize of BudgetFiscal Deficit to GDP
18 FebUnity Budget6.4 billion (1.26% of GDP)10.9 billion (2.1% of GDP)
26 MarchResilience Budget48.4 billion (11% of GDP)39.2 billion (7.9% of GDP)
6 AprilSolidarity Budget5.1 billion (12% of GDP)44.3 billion (8.9% of GDP)
May 26Fortitude Budget3.3 billion (19.2% of GDP)74.3 billion (15.4% of GDP)

*Source: Collected from MTI

**Exchange rate (as of 18 June): USD 1 = SGD 1.39


The first fiscal stimulus, known as the “Unity Budget” consists of 3 segments: SGD 4 billion will be allocated to the ‘Stabilisation and Support Package’ to support workers and enterprises, SGD 1.6 billion for ‘Care and Support Package’ to support households and SGD 800 million to support frontline agencies fighting and containing the pandemic.


① Unity Budget

- Introduce “Job Support Scheme (JSS)” to help enterprises retain their local workers by offsetting 8% of the wages, up to a monthly wage cap of SGD 3,600 for three months,

- raise Government’s co-funding levels of the Wage Credit Scheme (a financial support scheme for raises in employee’s monthly salary),

- provide additional support to five sectors (tourism, aviation, retail, food services, and point-to-point transport services) that have been directly affected by COVID-19,

- grant corporate income tax rebate at a rate of 25% of tax, capped at SGD 15,000 per company,

- enhance Enterprise Financing Scheme (EFS) by raising the maximum loan quantum (SGD 300,000 > SGD 600,000) and increase Government’s risk-share on loans (50~70% > 80%),

- offer property tax rebate of 15~30% for commercial properties,

- support SGD 100 ~ 300 one-off cash payout to all Singaporeans aged 21 and above,

- support minimum SGD 100 cash payout for every adult Singaporean with at least one Singaporean child aged 20 years and below (this year),

- support Grocery vouchers worth SGD 100 to low-income Singaporeans, etc.


In addition to the above, the plan to raise GST from 7% to 9% initially from 2021 to 2025 will not be coming into effect in 2021, and the GST rate will remain at 7% for 2021. Furthermore, the Monetary Authority of Singapore (MAS) eased its monetary policy by reducing the slope of the policy

band within which the Singapore dollar moves to a zero rate of appreciation to weaken Singapore dollar’s exchange rate.


The second supplementary budget known as the Resilience Budget is 7.5 times larger than the first budget and is earmarked for SGD 48.4 billion.


② Resilience Budget

- Grant an automatic deferment of income tax payments for companies and self-employed persons for three months,

- enhance the JSS by raising Government’s co-funding of wages rate from 8% to 25%, lifting the monthly qualifying wage ceiling from SGD 3,600 to SGD 4,600 and extending the Scheme from 3 months to 6 months,

- freeze all government fees and charges that corporates are obligated to pay, from 1 April 2020 to 31 March 2021

- enhance maximum loan quantum for EFS-SME Working Capital Loan from SGD 600,000 to SGD 1 million and enhance the EFS-Trade Loan,

- waive Property Tax for qualifying commercial properties,

- provide SGD 1,000 / month to eligible self-employed persons for nine months,

- support vocational training scheme,

- grant SGD 800 / month cash for three months to low- and middle-income employees who lost their jobs

- offer additional support to five sectors that had been directly affected by COVID-19 by supporting wage, rebating property tax and reducing the rent fee,

- triple the cash payout for all adult Singaporeans from the earlier announced range of SGD 100-300 to a range of SGD 300-900, depending on income,

- triple the additional cash payout given to each Singaporean parent with at least one young Singaporean child, from SGD 100 to SGD 300,

- triple grocery vouchers from SGD 100 to SGD 300.


The third fiscal package that the Government has undertaken is called the Solidarity Budget which is earmarked for SGD 5.1 billion. The Solidarity Budget is an extension of the previous budgets in which SGD 4.0 billion will be used to save jobs and companies and SGD 1.1 billion will be allocated to Solidarity payment that will be used to protect livelihoods. The total budget of the three fiscal measures is worth SGD 59.9 billion (12% of GDP). The Solidarity Budget was announced just one day before the circuit breaker took into effect.


③ Solidarity Budget

- Raise wage subsidy for all firms to 75% of gross monthly wages, starting from the first wages paid in April as part of the JSS,

- waive the monthly foreign worker levy rebate of SGD 750 for each work permit or S pass holder due in April,

- increase Government’s risk share of trade loan of EFS from 80% to 90%,

- enhance and broaden the support for Self-employed person Income Relief Scheme (SIRS),

- top-up of additional SGD 300 to cash payout for all adult Singaporeans (SGD 300-900), bringing the total to SGD 600 for every adult Singaporean,

- Cash payouts under the Care and Support Package will be brought forward to June 2020 instead of August 2020.


With the latest Fortitude Budget that injects SGD 33 billion, the Government will earmark a total of SGD 92.9 billion (19.2% of GDP) to support Singapore in the fight against the COVID-19. Overall fiscal deficit for FY2020 has been lifted to SGD 74.3 billion, which is equivalent to 15.4% of GDP.

④ Fortitude Budget

- Increase the duration of JSS payouts by one month for all firms as well as providing wage support at 75% until August or when they are allowed to reopen,

- create 40,000 jobs,

- create 25,000 traineeships,

- create 30,000 skills training

- grant a one-off SGD 100 Solidarity Utilities Credit to households with at least one Singapore citizen.



■ Prospects of and Implications for Singapore’s Economy


On 7 June, Singapore’s Prime Minister Lee Hsien Loong made a remark on the post COVID-19 era, emphasizing that COVID-19 has accelerated de-globalization and that the world will not return to the open and connected global economy anytime soon.


Indeed, governments have taken measures to raise trade barriers to protect their industries and companies have taken actions to reshore critical supply chains as part of COVID-19 response efforts. The Prime Minister said that in the post-Corona virus era, countries will no longer work together to enlarge the pie for all, but will fight more over how the pie is shared. In other words, Lee warned his country that the future global economy will no longer be in favor of Singapore.


To cope with potentially long-lasting consequences of the pandemic, the Singapore Government has decisively injected sizeable fiscal stimuli that is equivalent to almost 20% of its GDP. The budget will be used to minimize economic damage to workers, households and companies and maintain its status as a global hub.


Luckily, Singapore has solid national reserves in which can be drawn to finance the supportive measures. From the second Resilience Budget to fourth Fortitude Budget, SGD 4 billion, SGD 17 billion and SGD 31 billion has been financed from past reserves, consecutively. Altogether, among SGD 92.9 billion fiscal package, a total of SGD 52 billion will be drawn from the reserves. The only time that the nation had to tap the past reserves since the Singapore Government established the national reserves in 1991, was in 2009 recession when the government drew SGD 4 billion to finance SGD 20.5 billion that was earmarked for the Resilience Package.


The Singapore Government has never disclosed the actual amount of its national reserves, however, the Official Reserve Asset (ORA), which consists of foreign currencies, special drawing rights, International Monetary Fund reserves and gold, have grown substantially since the 1970s to SGD 425.4 billion as of May 2020. Under the assumption that the full SGD 52 billion is drawn from the ORA, it will bring the holdings down to SGD 3.734 billion, a level seen as similar to that as of July 2019.


At the same time, there are reasons for optimism in Singapore, especially in terms of opportunities arising out of the power dynamics between the United States and China. Recently, the US decided to revoke Hong Kong’s special trade status after Chinese National People’s Congress passed the national security law for Hong Kong. In turn, many global companies that currently process business transactions through Hong Kong are now eyeing Singapore as an alternative route. In fact, Singapore’s foreign currency deposits have increased since Singapore emerged as an alternative to Hong Kong. According to MAS, foreign currency deposits at banks in Singapore recorded SGD 27 billion in April, which almost quadrupled from the same month last year.


Economic outlooks are also improving. According to Singapore Commercial Credit Bureau’s (SCCB) third quarter’s Business Optimism Index (BOI) announced on 9 June, positive signals have been detected in the manufacturing, finance and IT services, despite the downbeat in construction and transportation sectors. Although business sentiment of the third quarter is still in dismal levels, a record low -7.88 in second quarter’s rebound to -5.16 indicates a positive outlook. The figures used in the survey represent the difference between the percentage of respondents expecting a better performance in the coming quarter and those who expect it to worsen, the number is positive if the percentage of respondents expecting a better performance is higher.

*SCCB’ BOI survey polls 200 business owners and senior utives on whether they expect increases, decreases or no changes in six areas (sales, net profit, sales price, new order volume, inventory level, employment).


After two months of stringent lockdown, the Singapore government has started to gradually ease the restrictive measures in three phases. Singapore has safely entered “Phase Two: Safe Transition” from 19 June as the number of new cases fell even during “Phase One: Safe Re-opening” (2~18 June). Under Phase Two, F&B outlets dine-in, retail outlets, sports facilities, private institutions resumed activities and all students will be returning to school by 29 June, after gradual expansion of attendance. Sports and religious activities will be partially permitted for gatherings and congregations of up to five people. Singapore government plans to shift to the final “Phase Three: Safe Nation” if transmission of COVID-19 in the community is kept low.


Singapore has been fighting the war against COVID-19 with one of the biggest economic fiscal packages in its history together with stringent lockdown measures. Singapore’s efforts to curb the spread of COVID-19 and gradually reopen its economy is expected to serve as one of the model cases both to ASEAN and the world.




Budget 2020: Advancing as One Singapore (Unity Budget), Ministry of Finance (17 Feb 2020)

Monthly Visitor Arrivals, Singapore Tourism Board (20 March 2020)

Ministerial Statement on Additional Support Measures in Response to COVID-19 Pandemic (Resilience Budget), Ministry of Finance (26 March 2020)

Singapore: COVID-19 Brings Singapore to Recession, UOB (26 March 2020)

Singapore: The Government Takes Out Big Fiscal Guns, DBS (27 March 2020)

Asian Development Outlook 2020, ADB (3 April 2020)

PM Lee: the COVID-19 Situation in Singapore, Prime Minister’s Office Singapore (3 April 2020)

Ministerial Statement on Additional Support Measures in Response to Elevated Safe Distancing Measures (Solidarity Budget), Ministry of Finance (6 April 2020)

World Economic Outlook, IMF (15 April 2020)

Macroeconomic Review, Monetary Authority of Singapore (April 2020)

Singapore: More Pain from the Pandemic Shock, DBS (27 April 2020)

Official Foreign Reserves, Monetary Authority of Singapore (8 May 2020) https://www.mas.gov.sg/statistics/reserve-statistics/official-foreign-reserves#2

2019 ASEAN & Korea in Figures, ASEAN-Korea Centre (May 2020)

MTI Downgrades 2020 GDP Growth Forecast to -7.0 to -4.0 Per Cent, Ministry of Trade and Industry (26 May 2020)

S’pore Downgrades 2020 Official GDP Growth Forecast Down to -4% to -7% YOY, From -1% to -4% Previously, OCBC (26 May 2020)

Singapore: Growth Better-than-Expected, but More Pains Ahead, UOB, (26 May 2020)

Ministerial Statement on Additional Support Measures in our Continuing Fight Against COVID-19 Pandemic (Fortitude Budget), MOF (26 May 2020)

Singapore’s “Fortitude Package”, DBS (27 May 2020)

Singapore: A Fourth Budget to Prepare Singapore for a Post-COVID-19 World, UOB (27 May 2020)

Economic Survey of Singapore (First Quarter 2020), Ministry of Trade and Industry (May 2020)

World Economic Outlook During the COVID-19 Pandemic, World Bank (8 June 2020)

National Broadcast by PM Lee Hsien Loong, Prime Minister’s office Singapore (7 June 2020)


[News Articles]

“DBS says Singapore Recession ‘Inevitable’; expects 2nd Stimulus Package of $14-16 billion”, The Straits Times (19 March 2020)

“Singapore GDP to Shrink 8.5% as Restrictions Extended, Citi Says,” Bloomberg (22 April 2020)

“Coronavirus: Circuit Breaker Extension Brings New Round of Downgrades in Growth, Employment,” The Straits Times (27 April 2020)

“The Big Read: Life After Circuit Breaker?Retail, Entertainment and Leisure Won’t be the Same Again,” Today (30 May 2020)

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