Macro Insights Weekly: Singapore’s renewed pandemic stringency
- New coronavirus variants are highly transmissible; they may also have vaccine resistant properties
- An abundance of caution warrants a degree of reinforced stringency on mobility and proximity
- Singapore’s imperative now is to vaccinate a wider population as soon as possible…
- … as vaccinated individuals are extremely unlikely to suffer from severe illness or fatality.
- A qoq decline in activity could be on the cards for Singapore in 2Q
Commentary: Singapore’s renewed policy stringency
Singapore stepped into 2Q with a spring in its step. March auto sales (+15.6%yoy), retail sales (+6.2%), and dining out (+8%) grew robustly, as did industrial production (+7.6%). Trade had perked up, with exports hitting record highs (USD41.3bn in March, +27.8%). Labour market was picking up, business confidence was on the rise, and company earnings were on the mend.
As April data starts to trickle in, they will most likely show a continuation of the trend, but May and June will be quite different, unfortunately. The authorities imposed a month of stringent measures on May 16, driven by concerns over a rise in community cases. As dining-in is suspended, large gatherings curtailed, and work-from-home becomes the norm again, domestic activities are bound to take a hit.
In addition to the usual concern about resurging cases in South and parts of South-East Asia, two other matters have come up. First, the spread of a particularly virulent variant of the coronavirus, namely B.1.167. The further muted form of the variant is B.1.167.2, which has been spreading rapidly in India, and to some extent, in the UK. Data suggest, but not yet confirm, that the variant is highly transmissible. Second, a few instances have come up in which fully vaccinated individuals have caught the Covid-19 infection and passed it on to others. As more data come in, public health professionals would be able to make the call if the practice that has caught on in Western economies, of relaxing mask mandates for those vaccinated, is a sound one. Until then, an abundance of caution warrants some degree of reinforced stringency on mobility and proximity, which is where Singapore stands now.
The WHO has already designated B.1.167 a variant of concern, with data from India showing nearly 30% of new infections there are stemming from that variant family. Even in the UK, which is presently characterised by a dramatic decline in hospitalisation and fatalities, the variant has begun to raise its head. At last count, it has been detected in 44 countries, including Singapore and the US.
Concerns notwithstanding, early data clearly suggest the usefulness of vaccines in dealing with the coronavirus, in general, and the variant, in particular. Although vaccinations do not fully eliminate the risk of catching the virus and passing it on, Singapore’s experience in the past few weeks is already supportive of those with vaccination not having to face any serious health consequence after catching Covid-19.
This is the essence of the pandemic battle, in our view. As long as nations manage to vaccinate a large chunk, if not all, of their at-risk population, they will be able to deal with new waves of infection, even if they are virulent.
On the road to vaccination, Singapore has picked up the pace with 3 million doses administered already. We reckon that in a month’s time, a critical mass of at-risk population will be vaccinated, adding a sense of safety in the community.
A more aggressive campaign to remove residual hesitancy regarding vaccination, making vaccines available to wider community, examining the possibility of vaccinating children, are all critical dimensions of putting the pandemic to rest. There is growing recognition among public health officials that shifting from a policy of outright suppression to considering SARS-Cov2 an endemic virus may be warranted. Governments around the world may follow that shift eventually, but only after mass vaccination.
What does this month of mobility restriction mean for Singapore’s economic outlook? We think what happened in Japan in 1Q may be instructive for Singapore’s 2Q outturn. Japan’s real GDP likely contacted by 2%qoq, saar as domestic demand deteriorated due to the resurgence of COVID-19, fully offsetting the recovery in exports. Singapore had the makings of domestic and external demand complementing each-other through April, but May and June would be setbacks, which may well cause a qoq decline in activities.
On a yoy basis, the GDP growth number will be amply positive though. None of the new restrictions are comparable to the severe stringency implemented during last year’s “circuit breaker.” Protocols to continue with production, transportation, work, and school are well in train, so the economy can carry on. Still, a decline in footfalls will hurt retail and recreation vendors, sentiments will be dented, and planned activities which would have added momentum to the economy would be postponed. Singapore’s outlook just got rather clouded, but between vaccination and public sector support, coming out from the May/June turbulence ought to be easier.To read the full report, click here to Download the PDF.
Subscribe here to receive our economics & macro strategy materials.
To unsubscribe, please click here.
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.