Singapore's economy to shrink by 8.5% in lockdown

Citigroup economists have warned that Singapore's economy will see a 8.5 percent contraction this year, following stepped-up measures on business activities and social distancing that were announced on April 21. Since April 7, non-essential businesses have been required to close their workplaces, while businesses still operating have been required to implement social distancing measures. These measures were initially intended to last until May 4, and had been projected to cause a 6 percent contraction in the economy.

However, following a spike in the number of COVID-10 cases, the government announced increased restrictions. Since April 21, the criteria to deem businesses essential—and therefore allowed to operate—have been tightened, and those businesses still operating have been told to further reduce the number of employees still allowed to work.

In a forecast released shortly after the new measures were announced, economists Kit Wei Zheng and Ang Kai Wei predicted that the extension of the shutdown period, together with the tightened operating criteria, would cause 25-30 percent of GDP to come to a standstill. The economists predicted that each month of extension would reduce GDP by another 2-2.5 percent—hence the revision of the initial 6 percent estimate.

The latest restrictions and the extension of the shutdown are likely to worsen the impact on many businesses in the city-state, including the construction industry, which has been ordered to close all work sites after the spike in infections was traced to multiple construction sites. In the F&B industry, outlets selling only dessert and beverage items have been required to close.

To keep businesses afloat and workers employed during the shutdown, the Singapore government concurrently announced that it would be extending wage support to all businesses with local employees. The support, which subsidizes 75 percent of the first $4,600 of gross monthly wages, was initially intended for the month of April, but will now cover the month of May as well.