Oral reply to PQ on economic impact of COVID-19

Question

Mr Desmond Choo: To ask the Minister for Trade and Industry in view of the global spread of the novel coronavirus (a) what is the estimated economic impact on Singapore’s GDP; (b) whether there has been a decrease in capital inflows; and (c) whether adjustments to forecasts on job creation are expected.

Oral Answer by Senior Minister of State for Trade and Industry Mr Chee Hong Tat

1. Mr Speaker Sir, the COVID-19 outbreak in China, Singapore and many countries in the region will adversely impact our economy.

a. First, it has led to a sharp fall in tourist arrivals, particularly from China. This affects our tourism, transport, retail and F&B sectors.

b. Second, domestic consumption in Singapore has declined as locals cut back on activities such as shopping and eating out.

c. Third, the outbreak will dampen economic growth in several of our key markets, especially China. This affects export-oriented sectors, including manufacturing and wholesale trade. These sectors are also affected by supply chain disruptions due to factory closures and labour shortages in China, due to the lockdowns and travel restrictions imposed by the Chinese government to contain the outbreak.

2. Regional financial markets, including Singapore, have seen greater volatility amidst heightened uncertainty and concerns over the spread of COVID-19. In Singapore, prices for equities and bonds denominated in Singapore dollars have fallen, and the nominal exchange rate of the Singapore dollar has eased in line with weaker economic conditions. Fortunately, these movements happened in an orderly manner, and MAS has not observed any unusual declines in short-term capital inflows.

3. As a result of the outbreak, MTI has downgraded Singapore’s GDP growth forecast for the year from the original “0.5 to 2.5 per cent” to “-0.5 to 1.5 per cent”. The current baseline view is that the GDP growth for 2020 will remain positive, but reduced to around 0.5 per cent. However, we know the COVID-19 situation is still evolving, and the total impact on our economy will depend on the length and the severity of the outbreak. We will continue to monitor the situation closely.

4. Sir, MTI’s assessment is that the outbreak is unlikely to affect the number of jobs created from new investments and projects, as these are long term in nature. However, there will be an impact on our companies and our workers in the near term, especially in the more badly affected sectors.

5. The government will work together with employers and our unions to support companies and save jobs for our workers during this difficult period. This is what our tripartite partnership is about. We stand together with our brothers and sisters, and we help one another through thick and thin.

6. I was glad to receive a message from a business leader who owns a chain of restaurants in Singapore and the region. He had advised other employers in his industry that, and I quote him: “most important, keep the team intact for you will need them to be ready for the recovery.” When we met the Singapore Hotels Association, as you know hotels are one of the sectors that are badly affected, the hotel owners and general managers fully supported working with the government and unions to keep their workers employed. I witnessed the same solidarity and support from our union leaders at a recent dialogue at NTUC. These examples and many others give me the confidence that as a nation, we can and we will, overcome this crisis together.

7. The Government has announced some measures to help those who are most affected by the outbreak, such as tourism and transport sectors. More details on how we will further support our companies and workers will be announced by the Minister for Finance in the Budget Statement.