With the novel COVID-19 pandemic consuming news headlines in virtually every part of the world, including Singapore, there appears to be little in the way of any positive economic news. The Prime Minister of Singapore recently announced that the impact of Covid-19 on the Singapore economy has already exceeded that of SARS in 2003 and you can expect an economic recession in the future.
Cues from the SARS Episode
The SARS pandemic that severely hit the Singapore economy in 2003 could serve as a starting point in analyzing the impact of the current COVID-19 outbreak. The impact of the SARS epidemic was primarily fell in the second quarter of 2003. The country’s GDP was shrink by 0.3% YOY (year-over-year) during the quarter, with sectors like restaurants and hotels (-26.8%), manufacturing (-7.2%), and transport services (-10.8%) all posting recessions.
Yet, the SARS pandemic didn’t last long, and hence it impacts on Singapore economy were transient. In the subsequent quarters, economic growth recovered very quickly and the country’s economy managed to report an even quicker expansion (4.5%) in the year. In addition to the construction sector (-8.6%), only the restaurant and hotel industry (-9.3%) and transport services (-1.3%) recorded full-year contraction.
Measuring the Impact Of COVID-19 On The Singapore Economy
The concern is that the impact from the COVID-19 could be much deeper as compared to SARS. The reason behind it is that the Singapore economy has become highly integrated to China since 2003. Tourism is the best example of this. The number of China tourists was increases by 6x in 2018 as compared to 2003. This isn’t surprising as China is the largest tourism market in Singapore, accounting for about 19% of total tourist arrivals. Considering this, the travel limitations due to the Coronavirus outbreak are and will severely impact the tourism sector.
For every three months of the travel ban, about SGD 1 billion of lost tourism receipts are expected. This does not include the indirect impact of global tourists deferring or canceling their travel plans to the region because of the current pandemic. Apart from this, China is also one of the biggest non-oil domestic exports in Singapore. Supply chain interference e.g. extended factor closures are impacting the manufacturing sector of the country.
Lowering GDP Growth Forecast
Considering the above as well as taking references from the SARS experience. It is expecte that the current pandemic will shave off about 0.5%-pt of the country’s annual GDP growth. The first quarter of 2020 is already deeply feeling the Impact Of COVID-19 On The Singapore Economy
The tourism sector of Singapore will be the worst hit as. It is expected to have a double-digit recession in the future. Other sectors like construction, retail, transport services, and manufacturing will also impacted, but relatively less. Education institutions will be less impacted as many of them are already adapting to online learning, for example, leading provider of JC economics tuition. Furthermore, these sectors are also expeced to the pandemic is subsides recover much quicker
In response to the current and expected impact of COVID-19 on the Singapore economy.The government has lowered the full-year GDP growth forecast to 0.9%. Cues from the SARS episode suggest that the impact will be temporary in nature. However, if the current outbreak keep on beyond that, the impact on the Singapore economy will be more severe.