Foreword by Director, The Association of Banks in Singapore
The COVID-19 outbreak has dealt a major blow to the global economy. The disease which was first identified at the end of 2019 has become a global pandemic, with more than 38.8 million cases and more than 1 million deaths recorded as of 15 October 2020.
According to the Ministry of Trade and Industry’s (MTI) latest economic performance report released on 11 August 2020, the Singapore economy contracted by 13.2 per cent on a year-on-year basis in Q2, worsening from the 0.3 per cent contraction in the previous quarter. The fall in gross domestic product (GDP) was due to the Circuit Breaker measures implemented from 7 April 2020 to 1 June 2020 to slow the spread of COVID-19 in Singapore, as well as weak external demand amidst a global economic downturn caused by the COVID-19 pandemic. On a quarter-on-quarter seasonally-adjusted basis, the economy contracted by 13.1 per cent, sharper than the 0.8 per cent fall in Q1. MTI has thus narrowed Singapore’s GDP growth forecast for 2020 from “-7.0 to -4.0 per cent” to “-7.0 to -5.0 per cent”.
While the downturn was evident across most industries, those that were worst-hit by the pandemic — travel-related, consumer-facing domestic-oriented and construction — had an outsized impact on overall GDP.
In comparison, the manufacturing and financial sectors were less affected. Manufacturing was supported by the stellar performance of the pharmaceuticals industry, while the financial sector benefited from strong growth in insurance and other auxiliary activities.
Finance & Insurance and Information & Communications Technology industries continued to support the growth of modern services in Q2. Although the Finance & Insurance industry was expected to ease in growth in Q2 from the exceptionally strong performance in Q1, it has continued to buck the trend of decline in the rest of the economy. In particular, as countries in the region entered lockdown, digital payments adoption accelerated. As a result, auxiliary activities in the financial sector — comprising mainly credit card network players — expanded steadily in Q2. Similarly, the insurance industry continued to benefit from strong demand for life insurance and reinsurance products, although at a slower rate relative to Q1.
In the banking segment, Asian Currency Unit loan growth remained positive at 2.2 per cent in Q2 due to strong credit demand from Europe, even as Domestic Banking Unit loan growth contracted slightly. Forex saw weakened outturns in Q2 as trading volumes fell to more normal levels, following a surge in March, which was driven by heightened volatility in financial markets. The progressive reopening of the economy should result in a sequential improvement in Q3 although the recovery ahead is likely to be uneven.
Timely and concerted policy responses from the government and the Monetary Authority of Singapore (MAS) have helped to cushion the economic impact of COVID-19 on businesses and households. The centrepiece of Singapore’s pandemic response was four Budgets — Unity, Resilience, Solidarity and Fortitude — which were unveiled in succession over a span of four months from February 2020 to May 2020. Together, the Budgets totalled $92.9 billion (19.2 per cent of nominal GDP), of which $70.9 billion represented direct financial injections into the economy, while the remaining $22 billion was reserved as capital for loan guarantees.
MAS also eased its monetary policy stance and ensured sufficient liquidity to the financial system. Easier domestic monetary conditions were complemented by measures MAS introduced together with the financial industry to ensure businesses and households retained access to credit and received relief on their existing financial obligations. Together, these fiscal, monetary and financial measures have averted severe lasting damage to the economy and are supportive of its recovery.
As Singapore stands at the crossroads between a crisis and an opportunity, it is hoped that The Singapore Banking & Financial Services Directory becomes all the more meaningful as a vital reference for Singapore’s financial sector. This joint publication by The Association of Banks in Singapore and Marshall Cavendish Business Information Pte Ltd, provides information on over 1,000 companies in the financial services cluster, and showcases the spectrum of products and services offerings that they provide.
Mrs Ong-Ang Ai Boon
The Association of Banks in Singapore