DBS has hopped on the bandwagon of the growing number of market watchers cautioning a looming recession in Singapore that spans this year.
Come June, the country will possibly tip into technical recession, DBS hinted.
DBS highlighted in its group research report on Thursday (19 March) that a recession is “inevitable” and “imminent” as it downgraded its full-year gross domestic product (GDP) growth forecast for the year from 0.9 per cent in February to 0.5 per cent.
The bank cautioned that if the outbreak takes a turn for the worse, outlook could also take the same turn.
Tourism-related sectors such as retail and restaurants will be impacted more than initially estimated by the new and unprecedented travel bans. This is because the countries that are enforcing these bans make up of nearly 70 per cent of Singapore’s visitor arrivals in 2019, DBS surmised.
DBS economist, Irvin Seah who authored the report stated that in the first half of 2020, the likelihood that a technical recession takes place is “almost a given”, as illustrated by the expected year-on-year contraction of up to two percentage points.
The definition of a technical recession is a sequential decline in GDP for two consecutive quarters.
It is predicted that negative growth will persist into the third quarter of 2020, with an improvement at the end of 2020.
This negative growth prediction by DBS entails that this year could be the worst economic performance that the country experiences since the dotcom bust in 2001 when GDP growth was 1.1 per cent.
Mr Seah noted in the report, “Putting into perspective, this will be a lot deeper than Sars, and more painful than the Global Financial Crisis.” The impact from the pandemic had also been mitigated thanks to the government measures, Mr Seah acknowledged.
Compared to 2019, this year’s full-year inflation was estimated at 0.4 per cent.
The 2009 financial crisis saw 23,430 retrenchments, but the research team forecasted that the full-year annual retrenchments this time will be 24,500 due to the crippled economy.
The report also highlighted that it is likely for a second stimulus package, with the amount of S$14-S$16 billion (2.9 per cent of GDP), to be announced soon. Among the anticipated new measures on the way could be personal income tax rebates for all taxpayers, one-month waiver of the Foreign Worker Levy for firms affected by new measures (such as Malaysia’s movement control order), and an immediate one-off cash grant to micro and small enterprises.
Meanwhile, on Wednesday (18 March), Deutsche Bank released a report predicting a severe global recession in the first half of 2020. GDP growth will undergo quarterly declines that is expected to “substantially exceed anything previously recorded, going back to at least World War II”.
Deutsche Bank report stated that the pandemic’s negative economic impact on China exceed its initial projections that was based on early evidence. Even so, the report cautioned investors about forecast uncertainty, as the global situation remains unpredictable and historic anchors are still lacking.