The Wuhan Coronavirus epidemic will likely have some adverse effects on Singapore’s tourism-related sectors in the coming months, while also throwing a spanner in the works of economic growth in the first quarter of this year, according to some economists.
With uncertainties still enshrouding the reach and spread of the virus, it is yet too early ascertain how much the overall economy will be impacted this year, the economists said to Channel News Asia (CNA).
Up until Tuesday (28 Jan), there are seven confirmed cases of the coronavirus virus in the country.
The Minister for Trade and Industry, Chan Chun Sing spoke at a multi-agency press conference on Monday (27 Jan) regarding Singapore’s economy, consumer and business confidence being affected, particularly the “immediate concerns” of the tourism sectors.
The effect on tourism will start appearing as early as February, as Song Seng Wun, the CIMB Private Banking economist remarked. This is especially due to the cessation of all group tours locally and abroad by the Chinese authorities which came into effect on Monday. The ratio of Chinese foreign tourists in Singapore is almost one fifth of the total visitors, Mr Song said.
“The latest measure will see visitor arrivals for February being affected and other frontline sectors, like retail and F&B (food and beverage), will also take some impact,” he further added and that “the longer this ban stays in place, the bigger the impact…And if the developments over the next month prove to be not as favourable, then it won’t just be the Chinese that are travelling less but across all nationalities. That will further impact the tourism-related sectors here.”
Over the past few days, mass cancellations of travel plans have been made from China. Alicia Seah, the director of public relations and communications of Dynasty Travel stated that February’s bookings from China have “all been cancelled.”
OCBC’s head of treasury and strategy, Selena Ling opined that the fall in economic and business confidence as well as tour cancellations will probably “cast a shadow” over the country’s growth trajectory in quarter one of this year.
China has also extended the holiday break for Chinese New Year, which has meant that factory output will decline, as well as consumer spending because people will remain at home. These will lead to the slowdown, a “significant hit” on the Chinese economy in quarter one, HIS Markit economist Rajiv Biswas remarked.
In light of this, Singapore’s manufacturing exports such as intermediate, finished goods and raw materials will suffer due to “flow-on” effect of the fall in import demand from China, Mr Biswas added.
Economists: Net impact is yet too early to determine
The three aforementioned economists agree that it is too early to determine the net impact of the outbreak on the country.
“The key questions are how long this will last, whether it will get more severe from here and what control measures are taken that might disrupt productivity…While people seem to be looking to SARS (Severe Acute Respiratory Syndrome) as a proxy, it is still too early to tell the full impact for now,” Ms Ling stated.
In a similar vein, Mr Biswas said that the overall impact on the economy is “highly uncertain, depending on the speed with which the Wuhan virus epidemic is contained.”
Consumer confidence yet appears to be unaffected currently, Mr Song added: “The thing to note is whether people are reassured by the immediate remedial measures that have been implemented. Compared with the SARS period where we were dealing with a virus outbreak for the first time, we’ve since had Zika and MERS (Middle East Respiratory Syndrome Coronavirus) and I think we are far better prepared in our preventive measures.”
“People seem to have gone on with their daily activities for now, though more are wearing masks. As long as people carry on with their daily lives, the impact on domestic activities won’t be as severe.”
A noticeable point according to economists is that, the contraction in economic growth and overall exports do coincide with the viral outbreak, meaning that there is less room for adjustment if a worst case scenario does occur.
Ms Ling is considering revising downwards her full-year growth estimate: “We were looking at 1 to 2 per cent for Singapore’s economy in 2020, but we may adjust to 0 to 2 per cent to accommodate the potential downside risks.”
Aid for businesses – how early and how large?
On Monday, Mr Chan voiced that the government will put in place the necessary measures to aid businesses creaking under the impact of the viral outbreak, as was similar during the SARS epidemic in 2003.
Specifically for the tourism-related industries, measures include enhanced training grants, property tax rebates, a bridging loan programme for SMEs, and a reduction in foreign worker levy.
Waivers of taxi operator license fees and diesel tax rebates for taxis are also some of the targeted measures for the transport sector.
Whether the government will introduce a relief package of that magnitude in the coming Budget 2020, economists believe that it is still too early to tell.
There might be budget provisions to aid vulnerable travel sectors and tourism, Mr Biswas opined.
On the flip side, the government could be adopting a “wait and watch” approach to the whole epidemic issue as it is still in the early stages, Ms Ling remarked.