SINGAPORE (July 15): Consumer spending levels in Singapore for 2020, like the rest of the world, have been adversely affected by the onset of Covid-19 lockdown measures. Yet with Phase 2 of “Circuit Breaker” measures well into its first month of implementation, research house Fitch Solutions predicts a recovery in consumption spending in 2021. 

According to Fitch, the impact of Covid-19 and the subsequent introduction of Circuit Breaker measures will see real household spending growing by just 1.2% y-o-y this year. This is a significant loss compared to the 3% y-o-y real growth seen last year. Still, despite Fitch’s country risk analysts estimating a 2.8% y-o-y economic contraction for the republic, household spending levels are not expected to enter the red this year despite pressure from higher unemployment, which the analysts expect to rise to 2.5% in 2020 from 2.3% in 2019. 

This is good news for some non-essential segments badly hit by the lockdown. Yet, Fitch warns that demand side risks emerging among consumers globally could nevertheless still see weaker consumer spending for Singaporean consumers this year. Economic backlash from the Covid-19 recession, disruption of global consumption patterns and residual fear of social contact keep consumption levels depressed for 2020. Social distancing, health checks and other measures retained to prevent viral spread could weaken the appeal of shopping and dining out.  

“High frequency data shows that since the first set of restrictions within Singapore were announced in April, consumer mobility behaviour has been significantly affected,” notes the research house’s Singapore consumer outlook report. Despite mobility improvements upon the introduction of Phase 2 reopening on June 19, this remains significantly below the baseline period recorded in January and February 2020. According to Google Mobility data, travel to retail and recreational outlets is down by an average of 32.7% relative to baseline, with this lower mobility likely to persist for the foreseeable future. 

Nevertheless, the Fitch team is optimistic that consumer spending could improve in 2021, forecasting real household spending to expand 2% y-o-y next year. “While in the short term it will take time for consumers to adapt to the new normal, the easing of lockdown is good news for the country’s economy and this removal of restrictions, along with the government’s stimulus plan leads us to project a recovery in consumer spending, as we look into 2021,” they report. 

Unprecedented economic stimulus introduced by the normally fiscally disciplined Singapore government will help ease the economic damage brought about by the pandemic. A whopping five stimulus packages worth $9.2 billion have been dispensed; the Care and Support package provides support households and cash payouts to consumers while the Stabilisation and Support package has provided wage subsidies, rental support and enhanced financing schemes for  directly-affected industries and self-employed individuals.

Looking forward, while Phase three of reopening remains to be announced, it will see Singapore reach “the new normal”, where it is likely to remain until an effective vaccine or treatment of Covid-19 is developed. No concrete details about what this next stage might look like has yet been released to the public.