The global spread of the COVID-19 virus has precipitated a global economic slowdown and Singapore’s small and medium enterprises (SMEs) are feeling the pressure. The SBF-Experian SME Index for 2Q20 – 3Q20F registered an overall reading of 48.3, the lowest reading since the inception of the SME Index (“the Index”) in 2009.
Given the escalating and accelerating impact of the rapidly evolving COVID-19 outbreak on the global economy, SME sentiments are likely to have contracted further.
The COVID-19 outbreak has significantly impacted China’s economy following an unprecedented lockdown aimed at containing the virus’ spread. China’s official PMI reading of 35.7 in February 2020 was the lowest on record, a significant decrease from a reading of 50.0 in January 2020.
The Ministry of Trade and Industry (MTI) noted that these developments may lead to supply chain disruptions and a fall in tourist arrivals from China which can impact domestic demand. MTI downgraded Singapore’s 2020 GDP growth forecast to -0.5% to 1.5% as a result in February 2020.
Recent developments in the COVID-19 outbreak have led to MTI to revise the GDP forecast downwards again to -4.0% to -1.0% for the full year. This comes on the back of advance 1Q20 GDP estimates indicating a 2.2% contraction for the local economy on a year-on-year basis. This marks the first time the economy has contracted since 2Q09 during the Global Financial Crisis. The International Monetary Fund has declared a global recession.
The findings are based on a survey of more than 3,000 SMEs, conducted between 13 January to 28 February, reflecting the sentiments at the early start of the pandemic’s repercussions on the Singapore economy.