Businesses warned of rough road ahead despite Phase Two

Singapore

EVEN as economists agree that Singapore's moving into Phase Two of reopening from Friday is a welcome confirmation that the worst is over and the economy can start recovering, they warn that the going will still be tough and businesses need to be mentally prepared.

The announcement from the Multi-Ministry Taskforce that most businesses can reopen from Friday (after June 18, 11.59 pm), was a welcome surprise for most given that the taskforce had earlier indicated that Phase Two could happen only at the end of June.

Chief economist for OCBC Bank Selena Ling said the move is "definitely welcomed" and may give some light at the end of the tunnel for sectors such as food and beverage (F&B) and retail.

But while this means the growth engine can be restarted a little earlier and will hopefully limit the Q2 trough, she warned that recent news of a potential second wave elsewhere in places such as China needs to be monitored.

"Hopefully, the demand recovery is better than what we have seen in China where it's relatively soft," she said. "(It) depends on the pace of domestic demand recovery, but the signs are hopeful and may be leaning towards 5 per cent contraction rather than 6 per cent contraction."

A NEWSLETTER FOR YOU

Friday, 8.30 am

SGSME

Get updates on Singapore's SME community, along with profiles, news and tips.

Sign Up

The taskforce announced on Monday that dining in F&B outlets will be permitted from Friday, subject to liquor sales and consumption ceasing at 10.30 pm. Live music and television and video screenings will not be allowed in all F&B outlets at this stage. In addition, mask-wearing remains mandatory, except when eating.

Larger public venues with high human traffic will be subject to capacity limits, and operators will be required to prevent crowds or long queues from building up.

Separately, personal health and wellness, and home-based services will also be allowed to resume. Registered clubs and societies, as well as tuition and other private enrichment classes can resume (with the exception of singing or voice training classes). All other healthcare services, including eldercare services in the community, individual health screening and aesthetic services, will also resume. Face-to-face visitations at residential facilities for the elderly will also resume.

DBS senior economist Irvin Seah noted that moving into Phase Two marks an important turning point for Singapore's economy but, he stressed, the recovery ahead will be challenging and uneven.

"Not all industries will recover at the same pace, and not everyone will feel the recovery in the same way," he said. "Some industries will continue to be weighted down . . . Key among those are industries worst hit by the pandemic - tourism related, aviation, and to a slightly lesser extent, the construction sector."

The construction sector will continue to face significant pressure given that there is still a high number of infections among foreign workers in the dormitories, he noted. There will be very strict safety measures imposed at work sites that goes beyond the manpower constraints already faced by many of these companies. So projects will be delayed, and there will be a need to renegotiate for some.

"We continue to maintain our full year GDP (gross domestic product) forecast of -5.7 per cent . . . but the caveat that we stress and emphasise time and again is that this will not be an easy recovery because the global economy is still struggling with the effects of the pandemic," he said.

"From a global perspective, Singapore is a small and open economy, dependent on global demand. Our own domestic demand is not enough to drive the entire economy. So for Singapore to fully recover from this pandemic, we need the global economy to recover first."

Mr Seah said he expects this to be a 24-month cycle, and that the earliest Singapore can return to pre-crisis levels is the end of 2021.

There were 214 new coronavirus cases confirmed in Singapore as at Monday noon, including three community cases, all of whom are work pass holders. There were no Singaporeans or permanent residents among the cases. Migrant workers living in dormitories made up the vast majority of the other cases on Monday.

Maybank Kim Eng senior economist Chua Hak Bin meanwhile said he is still comfortable with their expectation of a 7 per cent contraction for the whole of 2020, even as he stressed that there are many moving parts and a lot of uncertainty.

"Now, we can see some governments and markets getting nervous about the risk of a second wave, and we're still not quite clear how many will actually go back to restaurants and visit shops," he said. "And then of course border controls are till quite tight."

Dr Chua added that while it is a struggle to imagine the economy reverting to pre-Covid levels by the end of the year, "at least we're past the emergency phase already, and we're just debating the speed of recovery".

"I suspect we could get back to pre-crisis levels by the middle of next year, provided a vaccine is in sight," he said. "And I think there could be sectors that will grow and expand at quite a healthy pace which could offset the sectors that don't recover fully."

He cited finance, manufacturing, pharmaceuticals and potentially infocommunications as sectors that could compensate and offset other sectors that might not have fully recovered by then.

While the vast majority of activities will be allowed to resume at the start of Phase Two, the resumption of a small number of activities will take some time. These include religious services and congregations; large cultural venues such as libraries and museums; large-scale events and venues such as conferences, exhibitions, concerts and trade fairs; and entertainment venues such as bars, nightclubs, karaoke outlets, cinemas, theatres, as well as indoor and outdoor attractions.

Meanwhile, the taskforce stressed that while Phase Two will see the resumption of most activities, they are subject to numerous safe distancing principles, including ensuring that individuals - or where it is not feasible or practical, groups - maintain safe distancing of at least one metre at all times. Small-group social gatherings of up to five persons can also resume.

Co-chair of the task force, Lawrence Wong, warned that Phase 2 should not be treated as a signal that we can "relax" or "all let our guard down".

READ MORE: