According to a DBS report on Monday (27 April), retrenchments in Singapore could reach 45,600 in 2020 as the economy is in a “deep and protracted recession”, struggling with combating the spread of the COVID-19 pandemic amid the extended circuit breaker.
Irvin Seah, DBS’ senior economist who penned the report, stated that the country’s gross domestic product (GDP) is currently expected to fall 5.7 per cent. The hardest hit sectors by the circuit breaker extension are the services and construction sectors.
“Should Singapore fail in containing the outbreak, GDP growth could plunge to as low as -7.8 per cent,” he noted, adding that if this happens, this year could be the “darkest” year for the country’s economy since its independence in 1965.
In recent weeks, the number of COVID-19 infections skyrocketed in the country, as the virus is transmitted among the migrant workers population. Due to this, all workers in the construction sector have been put on Stay Home Notice (SHN) just as all construction activities are suspended.
Non-essential businesses have been told to shut down operation until 4 May, which was the initial end date for the circuit breaker. However, last Tuesday, a four-week extension of the circuit breaker until 1 June was announced by Prime Minister Lee Hsien Loong. The list of essential businesses has also been cut, following the latest extension.
“The implementation of the circuit breaker in early April, and the extension to June 1, though necessary to contain the outbreak, will be a nail in the coffin for many locally oriented industries,” commented Mr Seah.
A “potentially deeper contraction” in the services sector is predicted by Mr Seah amid the tourist arrivals that have come to a stop since the middle of March. Alongside this, consumer spending will also simultaneously decline even more in the coming months due to the reported 30 per cent decline in the food and beverage and discretionary item segments sales in February.
The drag on the economy will worsen as the measures become more onerous, he said. Due to this, the DBS report downgraded full-year growth forecast in 2020 to -5.7 per cent from the previous -2.8 per cent.
Mr Seah asserted that the economic damage would have been worse without the three fiscal packages totalling S$68.8 billion introduced by the Government.
However, as the economy falls into an unprecedented deep recession, a large number of jobs might still be lost despite these initiatives.
He pointed out, “Companies may have to shed more headcount to bring manpower costs to be in line with the fall in earnings. In addition, some companies with weaker financial standings could go belly up.”
“Many companies may crumble, and more jobs could be lost,” Mr Seah further remarked. Retrenchments could possibly increase to 45,600, a figure almost double that of the previous month estimation of 24,500.
Addressing the Government’s Jobs Support Scheme, he explained, “Though resident workers account for about 62 per cent of the total workforce, retrenchments involving local workers will be disproportionately less due to policy measures aimed at safeguarding jobs.”
On the first S$4,600 of an employee’s gross monthly salary, up to 75 per cent of wage support is provided by the Jobs Support Scheme for April and May. Also, depending on the sector, at least 25 per cent is for an additional seven months.
Based on Mr Seah’s estimation, potentially 24,800 residents could be displaced, with foreign workers accounting for most of the retrenchments. Nonetheless, the resident unemployment rate is estimated to increase to 4.2 per cent after seasonal adjustment by the end of the year, he stated. This is higher than the 3.2 per cent in Q4 last year.
As for the overall unemployment rate, it could increase from the previous 2.3 per cent to 3.6 per cent.
The fear of new waves of infection will mean a weak recovery and it will take a considerable time for economic activities to “resume normalcy”, Mr Seah gloomily concluded.
He cautioned, “Expect nothing less than an arduous path ahead.”