Singapore lowers growth forecast as virus hits economy

Visitors in Singapore on Monday. The city-state is one of the worst affected locations outside China, with 75 cases of the virus so far. (AFP)
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Updated 17 February 2020

Singapore lowers growth forecast as virus hits economy

  • Tourist arrivals, exports and domestic consumption affected in city-state

SINGAPORE: Singapore cut its economic growth forecast for this year on Monday as the coronavirus batters tourist arrivals and trade.

The city-state is one of the worst affected places outside China, with 75 cases of the virus so far. China has more than 70,000 infections.

Singapore downgraded its 2020 growth estimate to a range of -0.5 percent to 1.5 percent.

That compares with its previous forecast in November of 0.5 percent to 2.5 percent.

“The outbreak of the coronavirus . . . has affected China, Singapore and many countries around the world,” the trade ministry said in a statement. “In Asia, the outbreak is likely to dampen the growth prospects of China and other affected countries this year.”

Tourism arrivals have already started to decline, exports are expected to take a hit, and domestic consumption is likely to fall as people cut back on shopping and dining out, it added.

China is Singapore’s largest source of tourists and a major export destination.

The city-state was at risk of sliding into a technical recession, warned Song Seng Wun of CIMB Private Banking.

“There is a real possibility of two quarters of contraction or even two quarters of year-on-year decline,” he said.

“Mathematically it’s possible because of the integrated nature of the global supply chain and the impact of the slowdown in China that could have far-reaching implications on small trade-oriented economies like Singapore.”

As a small and open economy, Singapore is often the first to be hammered during global crises but it also recovers quickly when conditions improve.

Prime Minister Lee Hsien Loong last week warned the effect of the virus was already worse than that of the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003, as economies in the region are more closely linked and raised the possibility of a recession for Singapore.

“I think the impact will be significant at least in the next couple of quarters . . . I can’t say whether we’ll have a recession or not, it’s possible, but definitely our economy will take a hit,” he told reporters on Friday.

Singapore suffered a sharp, quarterly contraction at the height of the SARS outbreak, which killed hundreds after emerging in China, but bounced back swiftly.

National Development Minister Lawrence Wong last week flagged a “strong” budget — due to be delivered Tuesday — to counter the impact of virus.

Virtual oil summit planned amid ongoing market volatility

Updated 04 April 2020

Virtual oil summit planned amid ongoing market volatility

  • Meeting follows call from Saudi Arabia for urgent meeting and telephone diplomacy between Kingdom, Russia and the US

DUBAI: Leaders of the global oil industry are planning a crucial “virtual” summit next Monday amid ongoing volatility in crude prices and falling energy demand.

The meeting follows a call from Saudi Arabia on Thursday for an urgent meeting and a round of telephone diplomacy last week involving the Kingdom, Russia and the US, as well as meetings between policymakers and oil industry executives.

The summit is expected to involve the 11 members of OPEC as well as other oil producers from the OPEC+ group.

But exactly which countries will take part in the summit was still up in the air last night. 

Russian President Vladimir Putin was holding talks with executives from the country’s major oil companies before deciding whether or not to participate. The Russian leader has previously indicated his willingness to get involved in talks to help resolve the crisis in the global energy industry, but Russia was also the country that refused to take part in a round of deeper production cuts proposed by Saudi Arabia in Vienna last month, sparking the current price war.

In response to that refusal, the Kingdom increased production and lowered its selling prices. On Sunday, Saudi Aramco, which has pushed output to a record 12.3 million barrels per day, is scheduled to announce its “official selling prices” (OSP) for the month of May, expected to show a continuation of the deep levels of discount to attract customers, especially in Asia, in the battle for global market share. 

Brent crude continued its rollercoaster ride on global markets on Friday, dipping nearly 5 percent before hitting a high of 17.5 percent up at $34.91, before paring gains to about $33.

The options for the producers at Monday’s meeting are limited, in the face of an unprecedented drop in global oil demand. By some estimates, more than 20 million barrels of daily demand was lost last month, the biggest ever contraction in oil history.

Saudi Arabia and Russia, which between them produce around 23 million barrels per day, are unlikely to be willing to take all the pain of bigger cuts without an offer from the Americans.

US President Donald Trump tweeted on Thursday that he expected between 10 million and 15 million barrels of oil to be taken out of supply, but he did not specify where this would come from. Meetings were expected to take place at the White House with oil industry executives and policymakers on Friday.

Daniel Yergin, Pulitzer Prize-winning oil expert, said: “The ‘when,’ ‘how’ and ‘who’ of the potential deal remain unclear. And the larger the universe of players the more difficult it will be to implement an agreement.”

OPEC+ consists of the 11 OPEC members, led by Saudi Arabia, plus 10 non-OPEC producers, of which Russia is by far the biggest.

The involvement of the US in the Monday meeting is also unclear. America is not an OPEC member, but US oil executives have attended OPEC deliberations in the past. American participation in any new rounds of output cuts will be constrained by the fact that the US oil industry is made up of private companies — as opposed to state-directed corporations — whose interests diverge.

While big players including Exxon Mobil and Chevron might be willing to take some advice from the White House, the smaller companies in the Texas shale fields are more focused on the immediate financial repercussions of the past month’s volatility.