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Covid-19 pandemic could lead to 150,000 to 200,000 retrenchments, say Maybank economists

SINGAPORE — With the “circuit-breaker” measures in place for at least four weeks, one bank has said that the number of retrenchments this year could fall between 150,000 and 200,000, despite the Government’s three stimulus packages.

F&B outlets in Orchard Road on the first day of the circuit breaker on April 7, 2020.

F&B outlets in Orchard Road on the first day of the circuit breaker on April 7, 2020.

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SINGAPORE — With the “circuit-breaker” measures in place for at least four weeks, one bank has said that the number of retrenchments this year could fall between 150,000 and 200,000, despite the Government’s three stimulus packages.

Other economists are also painting a grim picture of the financial toll on Singapore’s economy, which is charting a course towards possibly the worst recession on record.

“This will be the highest (number of) retrenchments in Singapore’s history since independence, far worse than during the global financial crisis, and the Asian financial crisis,” said Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye.

In comparison, there were 10,690 retrenchments in the whole of 2019, according to the Manpower Ministry’s labour market report last month. The 2008 to 2009 global financial crisis saw around 40,000 retrenchments, while the 1997 Asian financial crisis claimed around 30,000 jobs.

The services sector, which has been hit hard by the Covid-19 pandemic, is likely to bear the brunt of these retrenchments this year, they added.

Around 77 per cent of this sector are Singaporean workers, though the economists predict that more than half of the retrenchments will involve foreign workers.

Based on the Enterprise Singapore’s list of essential services that are allowed to continue operations, the Maybank economists estimate that the four weeks of pre-emptive safety measures would effectively force around 1.3 million workers — a third of Singapore’s entire workforce, including foreign workers — into “hibernation”.

Said Dr Chua and Ms Lee: “We think the short-circuit measures and one-month partial lockdown will break the camel’s back for many businesses. Many businesses will likely fail and a huge number of jobs will be lost in the coming quarters.”


DBS Bank senior economist Irvin Seah said that the “disruptive nature” of the circuit breaker will incur additional economic pain for Singapore.

Mr Seah had forecast a 2.8 per cent baseline contraction of the economy for this year, which is “already the worst ever for this small island state”. With the circuit-breaker measures, which last from April 7 to May 4, this could potentially tip the full-year forecast towards a 4 per cent contraction, he added.

“Beyond the negative shocks from an impending global recession, these additional measures will further compound the woes of many local companies and could potentially lead to further increase in job losses,” Mr Seah said.

Maybank has also downgraded its full year economic growth forecast to -6 per cent for 2020, a steep fall from its previous prediction of -2.8 per cent.

This is lower than the Government’s official 2020 gross domestic product (GDP) latest forecast range of -4 to -1 per cent for the year.

One month of circuit-breaker measures will cost Singapore’s economy roughly S$10 billion, or 2 per cent of the GDP in 2019, said Dr Chua and Ms Lee.

Extending the circuit breaker by another month, a possibility that National Development Minister Lawrence Wong had warned about if the Covid-19 situation continues unabated, could double the financial toll to the economy, they added.

Doing so would bring Maybank’s full year GDP growth forecast to -8 per cent.

The tighter measures could also force more Malaysians working in Singapore to return home. “Shortage of foreign workers may stunt the economy’s capacity to capitalise on any recovery once Covid-19 is contained, as border controls may stay on for longer,” said Dr Chua and Ms Lee.


However, Ms Selena Ling, OCBC head of treasury research and strategy, said the financial impact of the Covid-19 measures is still too difficult to tell. Her bank predicts a 3 per cent GDP contraction for this year.

“While we see downside risks from the one-month domestic circuit breaker and growing global recession headwinds, it is hard to call where the bottom is from here given the rapidly evolving Covid-19 pandemic and how much of an impact the cumulative effect of the Unity, Resilience and Solidarity Budgets may have, although we do not think that the latter will be able to avert a recession story this year,” said Ms Ling.

The Unity, Resilience and Solidarity Budgets refer to the three Budgets announced by Deputy Prime Minister Heng Swee Keat on Feb 18, March 26 and April 6 respectively, requiring a historic drawdown of S$21 billion from Singapore’s past reserves.

Altogether, S$59.9 billion was set aside for the national fight against the Covid-19 pandemic, with measures geared towards helping businesses retain workers, easing the costs, credit and cash flow issues faced by firms, and to disburse money to households to tide through the crisis.

Maybank’s Dr Chua and Ms Lee also said that the possible spike in unemployment rates would be far worse without the fiscal measures in the three Budgets.

Said Mr Seah: “Having a strong national reserve has been fundamental to Singapore’s efforts to counter the negative shocks to its economy, and to ensure that its social fabric and economic structure remain intact.

“Years of heavy investment in its healthcare system has also proven to be instrumental in its ability to contain the spread of Covid-19. However, the days ahead will remain daunting. There could be more pain before signs of stabilisation.”

Related topics

circuit breaker recession economy Covid-19 coronavirus

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