Singapore's small domestic market is highly dependent on tourism as evidenced by Singapore Tourism Board (STB) statistics, which showed that 18.5 million tourists visited Singapore in 2018, of which 3.42 million were from mainland China.
During the current coronavirus crisis, with the reduction in the number of tourists from China, Singapore is expected to lose billions in tourism receipts.
This excludes the effect from other tourists cancelling their travel plans to Singapore.
Domestic consumption is falling as well, as residents avoid crowded places. This results in the fall in aggregate demand and slower GDP growth.
The impact from fearful consumers clearing the shelves of supermarkets and pharmacies could lead to a sudden shortage of household and hygiene products and, ultimately, supply shock if such behaviour continues. In turn, over-consumption of such goods could lead to price surges.
The companies that rely heavily on Chinese workers are also affected by the 14-day quarantine for workers returning from China.
If the situation worsens and Singapore's foreign labour supply decreases, productivity will suffer. A manpower shortage and delays in operations will result in reduced production output and services, slowing down GDP growth.
The Government has announced that there will be targeted measures to help affected companies and workers in the upcoming Budget 2020. A fiscal response, such as a tax rebate, would be a good relief to counter the economic impact and support the tourism, transport, retail and food and beverage industries.
May Thwe Thwe Khaing, 21
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