Zika outbreak will not sting Singapore’s economy: Analysts

Zika outbreak will not sting Singapore’s economy: Analysts

The rapid spread of Zika will not be an additional threat to Singapore’s already-cooling economy, said analysts who added that the virus' economic impact will not be comparable to the 2003 outbreak of SARS due to differences in transmission and fatality rates.

SINGAPORE: While startlingly swift, the outbreak of the Zika virus in Singapore is unlikely to create additional stress for the economy, which is already seeing growth faltering amid global headwinds, economists told Channel NewsAsia.

Since the first locally-transmitted Zika infection was confirmed last Saturday (Aug 27), dozens of newly-reported cases took the total number of people diagnosed with Zika to 151 as of Thursday.

Government agencies have since stepped up mosquito control efforts in high-risk clusters such as Aljunied and Bedok to curb the spread of the virus. While the recent spate of Zika infections has reminded many of the severe acute respiratory syndrome (SARS) outbreak in Singapore more than a decade ago, the economic impact of the latest mosquito-borne virus will likely be nowhere near, economists said.

“The impact of Zika would be marginal at worst,” said Nomura Singapore's economist Brian Tan. “Given the headwinds facing Singapore, I don’t think this is going to be the most significant issue for the economy.”

“People have been comparing this to SARS but it’s nowhere near as infectious or dangerous so we don't expect this to have that big of an impact,” said Mr Tan, adding that in terms of transmission, Zika is spread primarily via the Aedes mosquito and is not airborne.

OCBC’s head of treasury research and strategy Selena Ling agreed, noting that the SARS epidemic in 2003 was region-wide and dealt a big hit to the travel and hospitality sectors. However, Zika has thus far failed to spark fears of the same magnitude.

“Hence, I suspect it’s going to be a muted impact unless you see a prolonged scenario and more severe medical implications,” Ms Ling concluded.

Even as some businesses in the high-risk areas have noted a slowdown following the breakout of Zika in their neighbourhoods, economists told Channel NewsAsia that this will likely be temporary and may not accurately reflect overall economic activity among residents.

“It is a kneejerk reaction by consumers,” Nomura’s Mr Tan said. “Besides, the effect could be distributional. You may avoid having lunch at Aljunied but you’ll still need to have lunch so somewhere else could see a pick-up in activity. It’s more of a distribution of activity in terms of geography, instead of a drop in overall activity.”

Aljunied Zika mosquito banner

Banner detailing mosquito control measures near Blk 102 Aljunied Crescent, where Singapore's first locally transmitted Zika infection was discovered.

SHOULD TOURISM SECTOR BE ON EDGE?

Still, uncertainty has loomed over the local tourism sector, which accounts for nearly 10 per cent of the economy, as countries including Hong Kong and Australia issued travel advisories for visitors to Singapore. Meanwhile, Malaysia and Indonesia have also stepped up protective measures by introducing thermal scanners at border checkpoints and airports.

Experts say the upcoming Singapore Grand Prix scheduled from Sep 16 to 18 will be the key event to watch for any impact on the travel industry, but for now, most travellers seem to be staying on course with their plans in Singapore, according to airlines, hotels and travel agents that Channel NewsAsia spoke to.

A spokesperson for Singapore Airlines said in an emailed reply that the carrier has not “observed any demand shifts worth highlighting for travel to or from Singapore”.

Mandarin Oriental Singapore said it has received enquiries regarding travel safety to Singapore from travellers who have booked upcoming stays at the hotel. According to its director of communications Usha Brockmann, the hotel has "implemented an increased rota of health and safety standards in both back and front of house areas" as a safety precaution.

Local travel agency Chan Brothers similarly has not received any cancellations for its inbound tours, which are predominantly made up of groups travelling to Singapore for meetings, incentives, conferences and exhibitions (MICE), as well as educational-related trips, according to head of marketing communications Jane Chang.

Over at Star Holiday Mart, however, the travel agent had received around 10 to 12 cancellations as of Friday morning, alongside a rise in enquiries from concerned travellers regarding the state of the Zika virus outbreak in Singapore.

While general manager Dominic Ong said he is not too worried about the cancellations for now, there could be a cause for further concern if the outbreak of the Zika virus persists into October, where China begins its week-long Golden Week holiday. Mainland tourists made up nearly a fifth of the more than 8 million visitors to Singapore in the first half of 2016.

“There's the possibility that bookings from China may swing to somewhere else and there may be a reduction in tourists if (the rise in cases) doesn’t stop by this month. If the numbers stop then at least there’ll still be some confidence,” said Mr Ong.

The Singapore Tourism Board (STB) has since weighed in with the assurance that the city-state “remains a safe travel destination”.

STILL, ZIKA SHOULD NOT BE TAKEN LIGHTLY: ANALYSTS

As for other sectors like construction, where migrant workers have made up a sizable number of those tested positive, the impact will likely be marginal.

“You may get a couple of construction sites getting stop work orders but because this remains highly localised and given the ongoing destruction of mosquito breeding grounds, the impact will not be so widespread until it impacts the economy as a whole,” said Mr Tan, referring to the issue of a stop work order to a construction site at Sims Drive on Aug 27.

However, this does not mean that the government and businesses should rest easy.

IHS Markit’s Asia-Pacific chief economist Rajiv Biswas reckoned that the rapid escalation of confirmed locally-transmitted Zika cases remains a potential risk to the Singapore economy, particularly if the outbreak is not rapidly contained.

“With the Singapore economy already feeling the transmission effects of China’s economic slowdown and the impact of lower oil prices on the marine and offshore engineering industry, the Zika outbreak poses a further downside risk to the near-term economic outlook in the fourth quarter of 2016 and into early 2017.”

IHS Markit expects Singapore’s economy to grow at a “relatively moderate pace” of 1.7 per cent in 2017. However, a downside risk scenario where the Zika outbreak escalates and results in lower tourism arrivals, could prompt a cut in the gross domestic product (GDP) forecast, Mr Biswas added.

Follow See Kit on Twitter @SeeKitCNA

Source: CNA/sk

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