Despite the government’s effort manifested in the three stimulus packages and the one-month long “circuit breaker” measures, Maybank stated that the number of retrenchments in 2020 could be between 150,000 and 200,000.
Singapore could be moving towards possibly the worst recession on record as other economists describe the grim landscape of the financial damage on the economy.
According to Maybank Kim Eng economists, Chua Hak Bin and Lee Ju Ye: “This will be the highest (number of) retrenchments in Singapore’s history since independence, far worse than during the global financial crisis, and the Asian financial crisis.”
Relative to the whole of last year, there were 10,690 retrenchments, as stated by the Manpower Ministry’s labour market report in March. During the 1997 Asian financial crisis, 30,000 jobs were lost whereas the 2008-09 crisis robbed about 40,000 jobs.
They remarked that most retrenchments this year could come from the services sector, which has been impacted severely by the COVID-19 pandemic.
Although the services sector consists of around 77 per cent of Singaporean workers, the two economists foresee that foreign workers will make up of more than half of the retrenchments.
Based on the list of essential services stated by Enterprise Singapore that are allowed to operate, the four-weeks of pre-emptive safety measures could push about 1.3 million workers into “hibernation”, they estimated. This figure represents a third of the country’s entire workforce, inclusive of foreign workers.
“We think the short-circuit measures and one-month partial lockdown will break the camel’s back for many businesses. Many businesses will likely fail and a huge number of jobs will be lost in the coming quarters,” Dr Chua and Ms Lee opined.
The country will suffer extra economic pain due to the “disruptive nature” of the circuit breaker, DBS Bank Senior Economist, Irvin Seah noted.
Based on the forecast by Mr Seah, the economy for this year will contract 2.8 per cent at baseline, which is “already the worst ever for this small island state”. The full-year forecast might plunge to 4 per cent contraction now with the circuit-breaker measures in place from 7 April to 4 May, he noted.
Mr Seah additionally remarked: “Beyond the negative shocks from an impending global recession, these additional measures will further compound the woes of many local companies and could potentially lead to further increase in job losses.”
The full-year economic growth forecast by Maybank has also been downgraded from its previous -2.8 per cent to -6 per cent for this year. Maybank’s forecast is lower than the official latest gross domestic product (GDP) forecast range by the government at between -4 and -1 per cent for 2020.
Dr Chua and Ms Lee added that the economy will lose approximately S$10 billion or 2 per cent of 2019’s GDP due to the one-month period of circuit-breaker measures.
According to the National Development Minister, Lawrence Wong, there is a possibility that the circuit-breaker period will be extended by another month if the pandemic situation does not improve, and this could double the cost to the economy, they pointed out.
If that were the case, the GDP growth forecast by Maybank will be lower at -8 per cent. Malaysians working in Singapore might be compelled to return to Malaysia if tighter measures are in place.
The two economists reminded that the “Shortage of foreign workers may stunt the economy’s capacity to capitalise on any recovery once Covid-19 is contained, as border controls may stay on for longer.”
Respite from three stimulus packages
The financial impact of the COVID-19 measures is still too hard to tell, as stated by Selena Ling, who is OCBC Head of Treasury Research and Strategy. OCBC’s forecast for 2020 is a 3 per cent contraction in GDP.
Regarding the three budgets and circuit-breaker measures, Ms Ling commented that: “While we see downside risks from the one-month domestic circuit breaker and growing global recession headwinds, it is hard to call where the bottom is from here given the rapidly evolving Covid-19 pandemic and how much of an impact the cumulative effect of the Unity, Resilience and Solidarity Budgets may have, although we do not think that the latter will be able to avert a recession story this year.”
With the three budgets in place, a total sum of S$59.9 billion have been allocated to combat the ill-effects of the pandemic, with measures designed to retain workers, aiding businesses by easing costs, credit and cash flow as well as to distributing money to households to allow them to withstand the crisis.
Without the three fiscal expansions in place, the possible increase in unemployment would be higher, as mentioned by Dr Chua and Ms Lee.
Mr Seah highlighted that “Having a strong national reserve has been fundamental to Singapore’s efforts to counter the negative shocks to its economy, and to ensure that its social fabric and economic structure remain intact.”
“Years of heavy investment in its healthcare system has also proven to be instrumental in its ability to contain the spread of Covid-19. However, the days ahead will remain daunting. There could be more pain before signs of stabilisation,” he concluded.

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