SINGAPORE (June 16): The second phase of the circuit breaker measures in Singapore will begin this Friday (June 19), the government announced on Monday evening.

The gradual return to normalcy will have ‘significant implications’ towards growth, and provide much-needed relief to many businesses, writes DBS senior economist Irvin Seah in a note dated June 16.

“Though economic conditions will remain challenging, the economy is bottoming out,” he says.

During phase two of the lifting of the measures, people will be allowed to gather socially in groups of up to five persons. Retail businesses will be allowed to resume operations. Dining in at restaurants and hawker centres will also be permitted, with a limit of five people to a table.

Seah says that the worst could be over but recovery will come at a different pace for different people or industries.

“Some industries may face lasting industry specific changes that will hinder the pace of recovery in these sectors… Those that survive will emerge stronger,” Seah says

During the global pandemic, Singapore’s pharmaceutical industry benefitted significantly due to the spike in demand for Active Pharmaceutical Ingredients (APIs) and medical equipment.

On the rest of the industries, Seah predicted that industries such as tourism and aviation, which were the worst hit by the pandemic, could potentially take more than two years to recover back to pre-Covid levels (in terms of real GDP).

“Even as policymakers try to establish travel bubble and green lanes, aiming to revive cross border travel, short of an effective vaccine, the process is expected to be painfully slow due to the persistent spread of the virus across the world,” he says.

“The safety measures that may be put in place to ensure safe travel could also be onerous, hence deterring non-essential travel (i.e., tourism) in the near to medium term. Travel will never be the same post pandemic, unless an effective vaccine can be made available,” he adds.

The construction sector could also see major structural shifts, including a review of existing processes, and an added impetus on raising productivity within the sector.

The retail and food and beverage (F&B) sectors should pick up significantly in the coming weeks, during the gradual reopening of the economy. However, Seah believes that the retail sector will be disrupted by the ongoing e-commerce phenomenon, which was heightened during the Covid-19-induced circuit breaker measures.

“Companies in these two sectors that are better able to leverage on technology to access a bigger customer pool or to optimize their processes and reduce costs, will emerge stronger after the pandemic. Technology will continue to be the game changer in these industries,” he says.

On the economy’s GDP growth, Seah foresees the second quarter to be the worst, and signs of recovery, will only become clearer in the second half of 2020.

“Companies that have made the necessary transformations over the years, leveraging on technology and reducing manpower needs, will be in a better position to weather this crisis,” he says.

“Yet, the transition could be painful for some. Many companies may not survive, while other may have to cut costs and trim headcounts. These will have significant implications on jobs, particularly given that the industries that are worst hit by the pandemic are also the ones that are relatively more labour intensive,” he warns.

Growth in the labour market will be slower as well.

“This is due to companies trying to hold on to their workers for as long as possible, as well as the cautious hiring behavior usually seen after a turnaround in the growth cycle. Having come off a rough patch, employers would want to be doubly sure about business prospects before increasing headcounts,” he adds.