Getty Images
  • Singapore's economy could contract up to 7% this year, according to the country's trade ministry.
  • But it could be even worse, the ministry said, noting the "significant degree of uncertainty over the length and severity of the Covid-19 outbreak, as well as the trajectory of the economic recovery."
  • Singapore is the latest nation to predict a catastrophic shrinkage of its economy this year, driven by the pandemic.
  • It is likely to be particularly hard-hit given that two of its key industries - tourism and shipping - are being ravaged by the pandemic.
  • For more articles, go to www.BusinessInsider.co.za. 

Singapore's economy could shrink by up to 7% as it appears to head for its worst recession since independence, the country's trade ministry warned, making the south east Asian nation the latest to acknowledge the devastating economic impact of coronavirus.

The Ministry of Trade and Industry said in a statement Monday: "In view of the deterioration in the external demand outlook for Singapore as well as the expected economic impact of the CB (central bank) measures, the GDP growth forecast for Singapore for 2020 is downgraded."

The statement said the forecast for economic growth in Singapore is now between -7% and -4%, down from between -4% and -1%.

In an April review, the IMF projected that Singapore economy could contract by 3% in 2020, with most of the major advanced and emerging economies expected to experience full-blown recessions.

But Tuesday's downgrade is putting this figure even higher in the best case scenario of a 4% drop.

"Notwithstanding the downgrade, there continues to be a significant degree of uncertainty over the length and severity of the Covid-19 outbreak, as well as the trajectory of the economic recovery, in both the global and Singapore economies," the ministry's statement said.

Singapore's economy is heavily reliant on two industries majorly impacted by the virus, tourism and shipping. Singapore's port is the second busiest in the world, while the city state welcomes more than 15 million tourists every year - about three times its population.

The downgrade in Singapore's growth forecast comes despite higher than expected first-quarter GDP, which declined by 4.7% compared to the previous quarter. On a year-on-year basis, the economy contracted 0.6% in Q1.

Singapore on Tuesday released its fourth stimulus package worth 33 billion Singapore (R405 billion) to support the economy from the fallout of coronavirus.

The country's gloomy forecast comes days after China, the world's second largest economy, dropped its GDP target for the first time.

The true extent of the coronavirus impact on China's economy is not yet known, but the country's economy recorded its first contraction on record in the first quarter of 2020, shedding 6.8% of GDP.

Receive a daily update on your cellphone with all our latest news: click here.

Get the best of our site emailed to you daily: click here.

Also from Business Insider South Africa: