Features Singapore Economy

Coronavirus fears forecast to hit Singapore’s economy harder than SARS

13, Feb. 2020

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By Miyuki Shimizu

SINGAPORE, NNA – The coronavirus outbreak this month is forecast to hit the Singapore economy harder than a blow from the SARS epidemic 17 years ago as the city-state has closer ties now with China, the apparent origin of both diseases.

The GDP of Singapore, a prosperous Asian financial center that also depends on tourism from China, will fall in the first three months of the year, two economists say.

Singapore’s economy will probably shrink in the first three months of 2020 by 1 percent compared to the same period last year, Maybank Kim Eng analyst Chua Hak Bin said in a Feb. 5 research report.

Hirofumi Suzuki, an economist at Sumitomo Mitsui Banking Corp. in Japan, told NNA he expected a year-on-year drop of 1.5 percent for the first quarter. Ripples from the coronavirus spread this month will hurt Singapore’s economy more than SARS, he said.

The disease officially called COVID-19 has sickened some 60,000 people, mostly in China where it was discovered in December.

Singapore now relies more than 17 years ago on the economic growth of China, the government statistics show. SARS, short for severe acute respiratory syndrome, infected Singapore along with much of China from 2002 into mid-2003. Singapore’s non-oil domestic exports to China make up for 22 percent of the total exports in December 2019, a jump from 7 percent in the same month of 2002.

The number of travelers from China also reached 3.35 million from January from November of 2019, nearly six times the 570,000 of 2003, the data show. Singapore has banned arrivals from China because of the outbreak.

Absence of Chinese tourists and fears among Singaporeans about going outside will chill the city-state’s services sector, analysts believe. Japanese restaurants in some quarters are seeing 10 to 15 percent lower sales, one source close to the industry told NNA on Sunday.

“Local retail and F&B (food and beverages) as well as non-supermarket retail will take a hit as people avoid crowds and hunker down amid virus uncertainty,” said Vishnu Varathan, head of economics & strategy for Asia & Oceania Treasury at Mizuho Bank in Singapore.

The Singapore government projected in early January GDP growth this year of 0.5 to 2.5 percent. Economist foresee growth landing at the low end of that range.

China’s economic slowdown is likely to drag on the Singapore economy too, Varathan said. Unlike during SARS, when the post-IT bubble had set the stage for strong pent-up demand, “lingering uncertainties around U.S.-China (trade dispute) may hold back a rebound after” the coronavirus, he said in a recent email interview with NNA.

During SARS, the Singapore economy contracted 0.3 percent on year during the April-June quarter of 2003, hit then by a slump in the tourism and restaurant sectors. The country posted 4.5 percent year-on-year growth for 2003 overall. This year Singapore’s GDP will probably grow 1.2 percent, Suzuki said.

Maybank Kim Eng’s analyst Bin expects 1.1 percent growth for the full year.

Irvin Seah, senior economist of DBS Bank, said in a Feb 7 report the local lender downgrades 2020 real GDP growth forecast to 0.9 percent from 1.4 percent in January, considering “likely hits to consumer and business sentiment, tourism, and the regional supply chain.”