Months of COVID-19 restrictions have placed a huge strain on Singapore’s economy, shrinking by 41.2% quarter-on-quarter drop. With two consecutive contractions, Singapore has entered a technical recession.
Among the most heavily affected in Singapore is the manufacturing sector. In May 2020, the sector’s output diminished by 7.4% year-on-year. This contraction, according to the Ministry of Trade and Industry (MTI), is driven by the lack of external demand along with disruptions in the supply chain.
The Economic Development Board (EDB) recently released an assessment of Singapore’s manufacturing performance for the month of May. Let’s look at some key insights.
The transport engineering cluster suffered the most in the manufacturing sector, with an output decline of 40.7% year-on-year. Circuit breaker measures have greatly impeded the operations of both the aerospace and marine & offshore engineering segments.
Following it is the general manufacturing cluster which recorded a 26.9% year-on-year shrinkage due to scaled-down productions and lower export demand.
The output of the chemicals cluster, on the other hand, decreased by 13.5% year-on-year and saw declines across all of its segments.
The precision engineering cluster, overall, declined by 5.3% year-on-year. However, its machinery & systems segment grew by 2.8% due to increased production of semiconductor equipment.
The electronics cluster suffered a 1.0% year-on-year contraction. From January to May, this cluster has seen a 3.6% overall decline compared to the same period in the previous year.
The only cluster which registered growth is biomedical manufacturing, which grew by around 5.9% year-on-year. This is largely due to the pharmaceuticals segment which is supported by increased production of active pharmaceutical ingredients and biological products.
According to EDB, 60% of the manufacturers expect that business conditions will continue to be weak for the next quarter. Only four percent said that they expect the business outlook to improve. Furthermore, the overall expected decline in manufacturing output is around 32%, with transport engineering (-61%) and general manufacturing (-51%) being the most damaged clusters.
If you are interested in knowing more about the state of Singapore’s manufacturing sector, you can check EDB’s media release.
Apart from the weakened demand, the overall economic decline in the second quarter is also attributed in part to the country’s imposition of tighter COVID-19 circuit breaker measures.
The MTI’s forecast expects a 4 percent to 7 percent contraction in Singapore’s gross domestic product (GDP) by the end of 2020.
“We expect recovery to be a slow and uneven journey, as external demand continues to be weak and countries battle the second and third waves of outbreaks by reinstating localised lockdowns or stricter safe distancing measures,” according to Trade and Industry Minister Chan Chun Sing.
If the forecast would turn out to be true, this contraction would be the worst case of recession in Singapore since its independence.