Packed malls, rising property and COE prices — it’s hard to tell Singapore is in its worst recession

Yesterday, the Ministry of Trade and Industry (MTI) said that Singapore’s economy shrank 13.2 per cent for the second quarter of this year. — TODAY pic
Yesterday, the Ministry of Trade and Industry (MTI) said that Singapore’s economy shrank 13.2 per cent for the second quarter of this year. — TODAY pic

SINGAPORE, Aug 12 — Despite all the doom and gloom surrounding the economy since the Covid-19 pandemic began earlier this year, a 29-year-old who wished to be known only as  Lee said she is not too concerned over losing her job in the months ahead.

Working in the finance industry, she said it is quite unlikely for her to be retrenched given her job stability.

Lee is not the only one bucking the trend as Singapore grapples with its worst economic crisis since independence.

Soh Wan Wei, a marketing manager in a software company, said there has been no need for her to tighten her purse strings as her income has not taken a hit.

In fact, both women said their spending has decreased as the circuit breaker months and having to work from home meant that they are going out less, though online shopping is accounting for a greater portion of their overall spending.

“I go out less, I stop shopping for clothes, I eat at home,” said the 32-year-old  Soh.

“The only chance I can spend money outside is during weekends. I still go out and eat at restaurants,” said  Lee.

Stories like these from  Lee and  Soh may seem jarring, given the dire official economic figures.

Yesterday, the Ministry of Trade and Industry (MTI) said that Singapore’s economy shrank 13.2 per cent for the second quarter of this year compared with the same period last year.

It also downgraded Singapore’s economic forecast for this year to a contraction of between 5 and 7 per cent from an initial projection that gross domestic product (GDP) would shrink between 4 and 7 per cent.

Compared to the first quarter on an annualised seasonally-adjusted basis, the economy contracted by an eye-popping 42.9 per cent.

Before Covid-19 wreaked havoc on Singapore’s economy, the largest full-year contraction was registered in 1998, when the economy shrank by 2.2 per cent as it reeled from the Asian financial crisis.

The steepest quarter-on-quarter drop on an annualised seasonally-adjusted basis was 11 per cent during the third quarter of 2010, after the 2008/2009 global financial crisis.

While retrenchment numbers have spiked and GDP figures have been hitting record lows, large crowds still throng the malls on weekends. Property prices inched up 0.3 per cent for the second quarter, while latest Certificate of Entitlement prices in August rose by at least 7 per cent, suggesting that some consumers here have no proble spending.

However, economists told TODAY that there is no contradiction between the official numbers and what’s happening on the ground.

Selena Ling, head of treasury research and strategy at OCBC Bank, said the second quarter figures reflected how things were during the two circuit breaker months of April and June, which saw most workplaces shut in a bid to stem the spread of the coronavirus.

Now that Singapore is in Phase Two of its circuit breaker exit where most businesses are allowed to reopen, the “look and feel is very different”, she said.

Ling said the large crowds at shopping malls could be a reflection of some pent-up demand after the circuit breaker as well.

“Singaporeans haven’t gone away. We can’t travel, whatever expenditure (is occurring) is being spent here. Same for foreigners working here, there is no outlet,” she added.

The question though is whether the demand seen now is sustainable.

Economists also said that much of the spending on display comes from the higher-income households, who have not been as greatly affected by Covid-19.

Chua Hak Bin, an economist at Maybank Kim Eng, called Covid-19 a “regressive shock,” where sectors which are more labour-intensive and therefore made up of more lower-income workers have been hit harder.

The finance and technology sectors have emerged relatively unscathed out of the crisis, economists said.

“Even though this is the biggest recession since independence, this is also a very uneven recession whereby certain segments of the economy are bearing the brunt more than the rest. Unfortunately it is the lower income group,” said  Irvin Seah, a senior DBS economist.

Chua said that lockdowns worldwide have in fact raised the saving rates of higher-income households since they have not been able to spend on discretionary goods like travel or recreation.

“There is a lot of liquidity in the system and some has shown in pent-up demand for certain goods such as property purchases,” he said.

Economists also said that Government support, such as the Jobs Support Scheme which helps companies subsidies the wages of Singaporean workers, has also helped prop up consumer spending.

Over S$100 billion (RM305 billion). has been pumped into the Singapore economy over four budgets since the Covid-19 outbreak to help prevent mass business closures and retrenchments.

“That has perhaps concealed the real pain because jobs lost in the first half of the year are borne by foreigners Maybe some of these sentiments are partly inflated due to generous payouts which are set to fade,” said Dr Chua.

 Seah also said that there is usually a lag effect on the labour market, where the worst effects will materialise only at least two quarters after the record-low GDP figures.

He said that the labour market will likely bottom out only at the end of this year, and that might be when consumers here will start tightening their belts.

“In the coming months when the support measures expire, that’s when we will see things fall back to reality,” said  Seah.

While he said that consumers should be spending as it would help local businesses, he added that they should be mindful of the risk and be prudent. — TODAY

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