Recessions are never good for anyone. A sputtering economy typically leads to negative consequences on the financial, emotional, and physical health for many, regardless of age or occupation. The International Monetary Fund (IMF) had issued a warning about the economic toll caused by the coronavirus pandemic, with businesses scrambling to cope with lost revenue due to disrupted supply chains and quarantine measures.
Despite strong responses from governments on strict social distancing measures and rapid financial policy, it seems this recession has been predicted to have lasting effects for years to come.
With an import- and export-oriented economy, Singapore is inevitably extremely vulnerable to the economic impact brought about by the novel coronavirus. Even with all-out efforts by central banks and fiscal authorities to soften the blow, asset markets have cratered, and capital has been pouring out of emerging markets at a staggering pace. A deep economic slump and eventual financial crisis are unavoidable. The key questions now are how bad the recession will be and how long it will last.
Black Dot Research carried out a survey to explore the views of Singaporeans on the likelihood of a major recession, their readiness for it, and how government-implemented measures are helpful in overcoming economic challenges. The survey compiled answers from 132 respondents, compromising of a mix of ages, genders, ethnicities, and education backgrounds to best represent the Singapore population.
As the novel coronavirus outbreak had shut down many aspects of the Singapore economy, a majority of Singaporeans believe the country is in either an economic recession (53%) or a depression (25%). 20% of respondents believe the economy is “slowing down,” while just 3% think it is growing.
Widespread business closures and other efforts designed to halt the spread of COVID-19 had most economists predicting a significant economic recession. Singaporeans tend to concur, with 61% agreeing that COVID-19 is a factor for recession, while 37% think it is a somewhat likely factor. 100% of our respondents think they will experience some form of impact from a recession, with more than half (58%) anticipating the impact on them and their household to be major.
‘IT’S NOT THE FIRST TIME!’
Singapore’s central bank, the Monetary Authority of Singapore (MAS) announced a 2020 recession in their latest policy statement — citing a combination of factors ranging from supply chain disruptions, travel bans and general decline in demand that has contracted its economy due to the COVID-19 pandemic. Singapore is predicted to recover to pre-crisis levels following its downshift, but major uncertainty still remains as recovery will depend on the epidemiological course of the pandemic.
Consequently, most consumers are doubling down on essentials such as groceries, household supplies, and in-home entertainment, while discretionary categories like eating out, apparel, consumer electronics, and hospitality have seen significant decrease in spending.
To best weather the downturn, our respondents have been taking steps to prepare themselves: 44% have been reining in their spending, 22% are limiting their spending on non-necessities, 13% are taking stock with where they are in cash flow by staying in their jobs, while 11% are building up their cash reserves by saving for emergencies. Despite the red flags, there are still 8% of respondents who stated that they have not taken any steps to prepare themselves.
Singapore’s political and economic leaders are aware of the economic and other unprecedented challenges the country is facing, as well as the decline in consumer confidence. In recent months, their actions to alleviate the situation have included the passing of the economic stimulus packages, the decisions to suspend interest rates and mortgage charges, and government involvement to preserve jobs and help businesses stay afloat.
The subsequent stimulus packages that were introduced to bolster individuals and companies included loans and grants for corporations and small businesses, increased unemployment benefits for workers who have been laid off or working fewer hours amid the outbreak, and direct payments to low- and middle-income individuals and families.
Additionally, those programs are in part meant to encourage companies to keep workers on their payrolls. Even if workers are furloughed without pay, the government will step in and assume paying their salaries while the workers continue to be covered by any health insurance provided by their employers.
While more than half of our respondents (53%) feel that these government-implemented measures will be helpful in stabilising our economy, 30% still expressed their uncertainty.
RIDING WITH RESILIENCE
The second economic package — the largest in Singapore’s history, was unveiled on 26 March 2020. Singaporeans’ immediate reactions to the $48 billion “landmark” package has been overwhelmingly positive. It aims to address the impact of COVID-19 on Singapore’s economy and job security. The package also expands employment benefits, provides loans to businesses, gives direct cash payments to Singaporeans and helping households with daily expenses and flexibility on fees and loans.
STANDING IN SOLIDARITY
Subsequently, a third economic package was announced on 6 April 2020, to further help families tide through the circuit breaker phase between 7 April and 4 May 2020*. This Solidarity Budget alone costs $5.1 billion, with $4 billion coming from national reserves. The new measures announced aim to help businesses continue paying their workers and give households cash for more immediate needs.
*Singapore has extended its circuit breaker period to 1 June 2020.
Overall, direct cash payments have emerged as the most significant government-provided aid as most of our respondents rated it as the most helpful measure. Monthly wage subsidies have also been a salient measure as it has co-funded for more than 1.9 million local employees, allowing employers to provide for a more generous baseline wage.
Taken together, those measures form a novel, temporary expansion of the government’s role in the economy: It will be essentially paying millions of Singaporeans who are unable to earn a living and throwing thousands of businesses who are suffering from a lack of customers a lifetime.
A NEW NORMAL?
People around the world have been asked to make radical changes to their social behaviours — and while these mitigation methods have seen positive results in recent weeks, this coronavirus is going to be with us for a while. Inducing massive economic pain in order to save lives may be a brutal trade-off, but it helps us understand the immense value of following through on robust containment policies.
A downturn stemming from an epidemic is an unusual one. Not only does the coronavirus comes with intense uncertainty, but businesses and households are also uncertain of how long the threat will last and what measures governments might take to counter it. There’s a lot that has been lost, and a lot to rebuild—and this may not happen as quickly as we would like. Perhaps, then, it would be prudent to brace for a down cycle.