DBS downgrades Singapore's 2020 GDP growth forecast to 0.9% due to likely hit from coronavirus

The concern is that the impact from the novel coronavirus could be deeper than the Sars outbreak in 2003.
The concern is that the impact from the novel coronavirus could be deeper than the Sars outbreak in 2003.PHOTO: AFP

SINGAPORE (THE BUSINESS TIMES) - DBS Group Research has lowered its growth forecast for Singapore's 2020 real gross domestic product (GDP) to 0.9 per cent, from 1.4 per cent previously.

This is considering the likely hits to consumer and business sentiments, tourism and the regional supply chain from the novel coronavirus outbreak, DBS senior economist Irvin Seah said in a research note on Friday (Feb 7).

"The economic outlook is supposed to be improving, but the virus has thrown a spanner in the works," Mr Seah wrote.

The concern is that the impact from the novel coronavirus could be deeper than the Sars (severe acute respiratory syndrome) outbreak in 2003 because over the years, the Singapore economy has become much more integrated with China, he added.

For every three months of the city-state's travel ban, DBS expects a decline of about one million tourists, or about $1 billion in lost tourism receipts. This is based on an estimated 310,000 China tourists per month, and includes some immediate cancellations by regional travellers.

The drop in tourist arrivals will likely shave off about 0.5 percentage point from Singapore's full-year GDP growth, according to DBS.

Minister for National Development Lawrence Wong announced on Jan 31 that Singapore is temporarily closing its doors to all Chinese passport holders - save for those who live in the city-state - and visitors who were in mainland China in the past fortnight.

A robust fiscal response is expected, and further monetary easing could also be on the cards should the outbreak escalate, Mr Seah wrote.

On Wednesday, the Monetary Authority of Singapore (MAS) said there is still breathing room for the Singapore dollar to ease without an off-cycle move. The central bank held to the monetary policy stance taken at its last meeting in October 2019, which it said "remains unchanged" for now.

 
 
 

The government will also announce a relief package in the upcoming Budget to provide support for companies and industries affected by the outbreak.

"Indeed, robust and pre-emptive policy actions taken at this juncture will help to mitigate the negative impact of the outbreak," Mr Seah said.

During the Sars episode, the impact on Singapore's economy was felt mainly in the second quarter of 2003. During that quarter, GDP shrank by 0.3 per cent year on year, with sectors such as hotels and restaurants, transport services and manufacturing all posting declines. In particular, the tourism industry bore the brunt of the impact, DBS noted.

Overall GDP growth during the Sars outbreak could have been "a lot worse" if not for strong performance from the wholesale and retail trade as well as financial services, Mr Seah wrote.

The novel coronavirus has infected more than 30,000 people worldwide, with total deaths coming in at over 630. That puts its fatality rate at some 2 per cent compared with around 10 per cent during the 2003 Sars epidemic, though the novel coronavirus has sickened more people than Sars.

The virus was first reported as a string of pneumonia-like cases in Wuhan in December, before the World Health Organisation identified it in early January as a new strain of coronavirus. It has since spread to markets including Singapore, Malaysia, Thailand, Taiwan, France, South Korea and Canada.