SINGAPORE (June 29): Economists expect Singapore’s manufacturing to weaken in the coming months, following the plunge in May’s factory output numbers. The metric fell 7.4% year-on-year, reversing into the red after two months of stellar growth.

See: Singapore's factory output falls into the red after two months of outstanding growth

RHB Securities’ economists attribute this to the circuit breaker measures which restricted the operations of non-essential services from April 7 to June 1. This in turn, “halted production and dampened demand,” they elaborate in a June 29 note.

Specifically, declines were seen in the transport engineering and marine and offshore engineering sectors which were hit hard by disrupted works. This comes as the segments were heavily impacted by the spread of Covid-19 infections in migrant worker dormitories, as these individuals account for 75% of their workforce.

Meanwhile, the shuttering of retail joints, food and beverage outlets and service providers also caused a dent in the consumption of services.

For now, the RHB team has their doubts on a rebound in numbers. “We expect manufacturing output to remain weak, as support from the biomedical sector (which was a significant driver of economic activity previously) tapers off,” they note. They are looking at full-year manufacturing activity plunging 10% year-on-year.

CGS-CIMB economists Michelle Chia and Muhammad Zulkeffeli share the same sentiments. “We caution that the forthcoming recovery may be choppy, as policymakers remain vigilant about the risks of community transmissions.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Yu expect this to cause a 20% plunge in Singapore’s gross domestic product (GDP) in 2Q20. This is to account for the shut down of about 30% of Singapore’s economy during the circuit breaker, they point out in a June 26 note.

The duo are looking at better times ahead, as the local and global economy re-open. 

“The manufacturing outlook is improving as countries exit from lockdowns and consumer spending normalizes. Demand for pharmaceuticals will stay resilient while semiconductor production will be supported by data centres and cloud services,” they note.

As such, they are looking at a more moderate dip of FY20 GDP to -7%. This translates to possible “employment losses of around 100,000 to 150,000 in 2020, with more than two-thirds borne by foreigners,” they add.