The Economic Fallout of COVID-19 in Singapore

What can we expect?

The stated actions from consumers, e.g. via survey research, are not always deemed reliable. But the COVID-19 lockdown has given people plenty of time to think, so System 2 thinking can be a fair indicator of intended actions, particularly regarding more rational decisions such as the planning of household budgets and finances. Based on a BVA BDRC survey of consumers in Singapore, conducted via Dynata’s consumer panels, during the lockdown 63% of respondents consumed more news media than average to keep themselves up to date with developments on the pandemic, and 41% of consumers took time to review their finances/financial plans and their careers.

Brand managers will need to adapt to a new economic reality that will see consumers still spending but trading down to lower-cost alternatives across a range of categories. This brings both threats and opportunities to brand managers.

The BVA BDRC/Dynata survey assessed how people had so far been impacted by COVID-19, and what their intended actions would be post-lockdown, specific to household spending. The survey was conducted in May 2020, a time when people had already experienced the full ‘circuit breaker’ measures, and following the announced phased reopening of the economy in June.

The Singapore economy (and the global economy that it depends on) has had its worse contraction in living memory. We are still speculating what the nature of the recovery will be: V-shaped (the rapid recovery that we are all hoping for), W-shaped (early recovery, but with a new dip due to a resurgence and renewed lockdown), L-shaped (the worst outcome with no recovery in sight ), or U-shaped (perhaps the most likely, requiring a waiting period for recovery, but with the question as to how long).

What is certain is that people have already been affected.

By the end of May, 50% of households had seen a reduction in their income, 15% had seen someone in the household lose a job, and 31% had had to dip into their savings to subsidise their living costs. Those on lower incomes (PMI of less than S$3,000) have been affected more, with 63% seeing a drop in income, compared to just 33% of those earning more than S$8,000 per month. 10% have taken out loans or refinanced during the crisis, but this was more consistent across income groups.

The lockdown economics

Some sectors benefitted during the lockdown, including supermarkets, media, and specific household categories where consumers needed to adapt to spending more time in the home.

Most households (86%) increased their spending in supermarkets either because they could no longer eat out (66%) or for stocking up (37%). And with supermarkets being one of the only retail outlets allowed to open during the lockdown, 31% found themselves spending more on groceries because they were simply making more frequent trips to the supermarket in order to get out of the house.

With people being forced into staying at home longer, many found themselves spending more on some home services or products, including signing up for video streaming services (48%), doing more video gaming (43% increased how much they gamed, plus 4% took up gaming for the first time), upgrading internet or PCs (28%), and buying new home appliances (15%) and new furniture (5%). A lot of this is a result of having to work from home and finding more entertainment at home instead of outside.

While most looked for more movies and TV series from streaming services, 13% of households upgraded their cable TV subscription, to get more channels showing that traditional linear TV is still in demand. There could also have been something of a renaissance in offline gaming, with 25% playing board or card games (more than usual), and 32% taking part in new types of home-based exercise, e.g. yoga or weights.

The lockdown gave people more time, and consequently 62% found ways to improve themselves through learning to cook (44%), reading (27%), or other creative activities such as writing, art, or music (22%). Those being ‘forced’ to cook could end up eating at home more in the future (to try out their recipes), rather than eating out.

It has also been a time of upskilling, with 18% reading up on business to improve their management skills, and the same number improving their IT skills.

The post-lockdown economics

The consumer outlook is pessimistic – 17% expect someone in their household to lose their job as a result of the economic fallout of COVID-19 (15% of households say someone has already lost a job), and another 42% expect further loss of household income. 40% expect to have to dip into savings to subsidise their living costs and 11% expect to take out loans or refinancing. This is in addition to those who have already undertaken these measures, as mentioned earlier. In combination, these measures will have serious implications for the Singapore economy.

But the economy will still function.

Firstly, there will be a temporary recovery, partly by consumers wanting to get out of the house more, as well as pent-up demand for some essentials, e.g. haircuts! Consumers will also seek a boost in morale through some ‘retail therapy’. This will manifest itself in a resumption of offline shopping by visiting stores and going back to restaurants and bars. The key motivators for this will be to seek out new products that retailers and restaurants might want to introduce post-lockdown (20% of consumers are looking for new menus from restaurants, and 24% for new products from retailers).

The lockdown has forced more people online with greater online purchasing, and more home delivery (instead of eating out) is likely to be sustained. 54% stated that they had shopped more online during the lockdown (including 3% who had never shopped online before), and 33% claimed they would continue to shop online more than before, even when all shops are open. 53% have started using new retailers during the lockdown, and among these 42% were dedicated online retailers (with no physical stores). This all points to much greater e-commerce in the longer term.

Home delivery for restaurants has been a growing category over the years, with more people using Grab and Deliveroo, among others. During the lockdown, consumers have used more delivery services for a wider range of mealtimes than before. Many say they will continue to use these home delivery services at these new mealtimes after the lockdown, particularly if home-based working becomes the new norm for those able to work remotely, e.g. in service industries.

But in the medium term (i.e. for at least six months), nearly all consumers state that they will seek to reduce their household expenditure, including 55% who (under budget pressure) have no choice, and 40% who don’t have to but think it would be prudent to do so. Among these, one-third say that as a result of the changes brought about by COVID-19, they have simply found new ways to cut costs, although the majority will do so in order to plan for more difficult times ahead.

The main ways that people will reduce expenditure for at least the next six months are summed up in the chart below:


In the longer term, we should see a recovery of the most severely impacted sectors: travel and tourism. But even here consumers foresee big changes. With a strong Singapore dollar and a wide range of flight connections (in normal times), most Singaporeans travel internationally. But in response to either the health threat or budget pressure, 38% of consumers will travel less frequently than before even, when travel returns to a level of normality. 22% will take lower-cost holidays (e.g. shorter haul, and budget options for flights and hotels), and 20% will consider staycations in Singapore, hence opening up a market for more domestic holidays in Singapore itself. With hotels in Singapore benefitting much less from inbound travellers, they will need to market themselves more to their home market, with more emphasis on the hotel than the location.

COVID-19 has been a catalyst for change. Some will argue that the changes are overstated and there will be a greater resumption of normality. Others argue that this has been an economic shock like no other that will result in the most significant changes in consumer behaviour ever seen. What is clear is that consumers will need to tighten their belts during an economic downturn expected to last well into 2021. With governments around the world taking on more national debt to help their economies, some fear more inflation. We argue that this old bogeyman of economics will no longer be so relevant as consumers can find cheap substitutes for their common purchases. These will be supplied by an increasingly competitive marketplace, with brands innovating and providing new products delivered to consumers via lower-cost business models. The challenge for businesses is how to develop these lower-cost models going forward. In the next article from BVA BDRC, we will look at the business response to COVID-19, and how businesses will evolve in a post-lockdown world.