12.6% savings contracts over one year

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A general view of the Marina Bay Sands, the ArtScience Museum, the Singapore Flyer and the central business district on June 19, 2020 in Singapore.

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Singapore’s economy contracted 12.6% in the second quarter from a year ago, according to estimates released by the Ministry of Commerce and Industry released on Tuesday.

Analysts polled by Reuters expected the South Asian economy to contract 10.5% year-over-year in the quarter ended June 30.

Singapore’s economy contracted 0.7% in the first quarter, the ministry said.

Economic performance in the second quarter deteriorated due to the implementation of partial foreclosure measures – which the Singapore government has called a “circuit breaker” – aimed at reducing the spread of the coronavirus.

These measures, which began in early April, have resulted in the closure of most workplaces (except those providing essential services) and the temporary closure of all schools. The “circuit breaker” lasted most of the second quarter, with the Singaporean government relaxing some measures from early June.

Restrictions hurt businesses dependent on domestic consumption. Retail sales in the country fell 52.1% in May from a year ago – the largest drop since records started in 1986, Reuters reported.

At the same time, the city’s commercial sectors were also penalized by reduced global activity and a surge in American-Chinese tensions.

But Alex Holmes, an Asian economist at the consulting firm Capital Economics, said activity in Singapore has rebounded since the easing of partial lockdowns last month.

“While many industries, including tourism and hospitality, will continue to suffer, the economy is expected to rebound faster than others in the region,” he wrote in a note last week which gave a overview of Singapore’s second quarter economic performance.

“The main reason for optimism is the record size of the government’s stimulus package, which is equivalent to around 20% of GDP,” he added.

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