Wuhan virus to hit Singapore’s tourism sector, but too soon to assess impact on overall economy: Experts
SINGAPORE: The Wuhan virus outbreak is set to impact Singapore’s tourism-related sectors in the coming months and possibly “cast a shadow” on economic growth for the first quarter, some economists said.
But with uncertainties still swirling over the severity and spread of the virus, it is too early to tell how big a hit the new infectious coronavirus could have on the overall Singapore economy this year, they told CNA.
As of Tuesday (Jan 28), Singapore has confirmed seven cases of the China-originated virus.
Speaking at a multi-agency press conference on Monday, Minister for Trade and Industry Chan Chun Sing warned that the outbreak will affect Singapore’s economy, business and consumer confidence in 2020, with tourism-related sectors being of “immediate concern”.
CIMB Private Banking economist Song Seng Wun said this impact on tourism will likely start showing as soon as next month, particularly after authorities in China announced a halt of all group tours, both at home and to other countries, with effect from Monday.
China is the biggest source of tourists to Singapore, accounting for nearly one fifth of total visitor arrivals, he said.
Already, one travel agency has seen a flurry of cancellations by Chinese tour groups over the past few days. Dynasty Travel’s director of public relations and communications Alicia Seah told CNA that its bookings from China for February have “all been cancelled”.
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.”
“The longer this ban stays in place, the bigger the impact,” he added. “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.”
Ms Selena Ling, OCBC’s head of treasury research and strategy, also told CNA that the tour cancellations, alongside some hit to business and economic confidence, in the wake of the Wuhan virus outbreak will likely “cast a shadow” over Singapore’s economic growth momentum in the first quarter of 2020.
In a bid to curb the spread of the new coronavirus, China has also rolled out other measures, such as extending the Chinese New Year holiday. The effect of this extended break on factory output, alongside lower consumer spending as people stay at home, will have a “significant hit” on the Chinese economy for the first quarter, said economist Rajiv Biswas from IHS Markit.
This weaker Chinese demand for imports of goods and services could have “flow-on effects” to Singapore’s manufacturing sector, which exports raw materials, intermediate and finished goods to China, the chief economist for Asia-Pacific added.
FULL IMPACT STILL TOO EARLY TO TELL: ECONOMISTS
But beyond that, these three economists stressed that it is still too early to assess the full impact of the virus on the Singapore economy.
Ms Ling said: “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.”
Echoing that, Mr Biswas said the extent of the negative hit on Singapore’s economic growth remains “highly uncertain, depending on the speed with which the Wuhan virus epidemic is contained”.
Mr Song also noted that at the moment, consumer confidence in Singapore appears to be unaffected.
“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,” he said.
“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.”
READ: Singapore must be psychologically prepared that Wuhan virus could be worse than SARS: Lawrence Wong
Nevertheless, economists noted that the outbreak coincides with a dip in overall exports and growth in Singapore’s economy, suggesting less wiggle room should a worst case scenario happens.
As such, Ms Ling said she is mulling a slash in the lower-end of 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,” she said.
HELP FOR AFFECTED BUSINESSES – HOW BIG AND HOW SOON?
Mr Chan on Monday had said that the Government will implement necessary measures to help businesses impacted by the Wuhan virus, as with previous episodes such as the SARS outbreak in 2003.
These could include reducing business costs, alleviating cash flow problems and help to retain workers.
During the SARS outbreak in 2003, the Government rolled out a S$230 million relief package to support the most adversely hit sectors.
For the tourism-related industries, these included property tax rebates, reduction in foreign worker levy for unskilled workers, a bridging loan programme for small- and medium-sized enterprises to alleviate short-term cash-flow problems and enhanced training grants.
The transport sector saw targeted measures such as diesel tax rebates for taxis and waivers of taxi operator license fees.
Economists said it remains too early to speculate if the Government will release a relief package of a similar quantum this time round. They also had mixed views if help could come as early as the upcoming Budget in February.
For instance, Mr Biswas thinks the upcoming Budget statement, which will be delivered on Feb 18 by Finance Minister and Deputy Prime Minister Heng Swee Keat, could include measures to assist the vulnerable tourism and travel sectors.
On the other hand, Ms Ling reckoned that it is still early days into the virus outbreak and the Government could take a “wait and watch" approach.
IMPACT ACROSS THE REST OF ASIA
As of Tuesday, the death toll in China has jumped to 106 and the number of total confirmed cases up to 4,515, the country’s authorities said.
Across the world, confirmed cases have also been reported in Hong Kong, Japan, Macau, South Korea, Taiwan, Thailand, Vietnam and the United States, heightening fears of the global economic impact of the new deadly virus.
For Asia Pacific, the Wuhan coronavirus poses a “significant downside risk” to region’s economic outlook in the near term, if the epidemic continues to escalate in coming weeks, said Mr Biswas.
“The extent and duration of this negative shock to regional economic growth will depend on how quickly the Wuhan virus epidemic can be brought under control, which remains very uncertain.”
Governments in Asia Pacific are likely to respond with a range of fiscal and monetary policy stimulus measures to prop up growth momentum in the near term. In particular, measures to help the tourism and travel sectors which are particularly vulnerable to this economic shock, he added.