Novel Coronavirus (2019-nCoV) set to hit businesses hard even as the global economy is reeling under multiple factors, causing a slowdown. It is as if the US-China trade war, which impacts the Singaporean economy due to a disruption in the global supply chain, was not enough that a disease has occurred to dent the businesses across the world further. The death toll from the n-Cov has reached alarming levels in China, the country whose Wuhan city is the epicenter of the disease. Thousands have been tested positive in China, and most of the residents in Wuhan are locked down in their houses to prevent any further spread. Various countries, including Singapore, evacuating their citizens from the Chinese city. Those who are returning to their homelands gets quarantined in special facilities for 14days. International headlines have remained dominated by the spread of disease, its impact on public health, and the measures taken to contain losses.
All this severely impacts businesses across the globe and especially in countries that are a dominant trade partner of China. The financial heart of Southeast Asia, Singapore, is in the grip as well. The city-state, where small and medium enterprises are at the forefront of economic growth, is set to feel the pressure resulting from the disease’s outbreak. The impact on the Singaporean economy and its businesses will be from various fronts.
Curtailment of movement and the downside for tourism
Singapore’s tourism industry is a significant income generator. Of all foreign nationals visiting Singapore, 20 percent are from China. More than 3 million Chinese citizens came to the city-state in 2019 and brought with them what added to the Singaporean economy- foreign exchange and demand for local products and services. Pictures in news media have shown the deserted streets of China’s Wuhan city, and it can serve as a cue to all what the disease can do to the movement of people. One thing is definite that the year 2020 will not witness the same number of Chinese nationals visiting Singapore, and given that the disease is yet to be adequately understood and tackled, the number may come down drastically. Even those coming to Singapore gets screened thoroughly ahead of being allowed to roam freely. The city-state’s tourism sector will feel the heat since twin factors will come into play. First, the downturn in China’s economy due to the impact of coronavirus will leave less money in the hands of Chinese people, and hence they will spend less while on holidays. Second, the lesser arrival of Chinese nationals will lower demand for hospitality and other services, especially catering to tourists.
Cancellation and postponement of events
An event that was to be held in February by The National Association of Travel Agents Singapore (NATAS) will now be in May 2020 due to fears of lesser than expected participation in February. Many other events scheduled in the upcoming months are sure to be adversely impacted due to the outbreak. Travel restrictions are in place, and many visitors that were to attend meetings and exhibitions will undeniably face an unprecedented blockage in making it into the city-state. Likewise, one of the significant events, the Singapore Airshow Aviation Leadership Summit scheduled alongside the Singapore Airshow 2020, now canceled. Report confirms as many as 70 participating companies pull out from the Singapore Airshow 2020. However, the event will go ahead, sans these exhibitors with added precautions. One can imagine the impact of these cancellations; the Aviation Leadership Summit could have had hundreds of aviation leaders and government officials reaching many deals had the event gone through as planned.
Lowering of Manufacturing Output
China is a major importer of many commodities that go into feeding Chinese factories is reflected well in the fact that the country’s share in global GDP in 2018 was more than 18 percent. The oil prices went down in the international market due to outbreak of coronavirus, and metals like steel have also lost much of their sheen. Singaporean businesses are a part of the global supply chain, and any disruption will hit them hard. The Singaporean Government has warned that the outbreak of coronavirus set to hurt growth.
Given that the GDP growth rate last year plummeted to its lowest level in a decade, the warning appears even more frightening. The trade minister talked about why businesses need to broaden the horizons concerning supply chains to limit the impact of unexpected shocks like coronavirus. China has closed many factories owing to the disease outbreak, and since Singapore supplies many materials to factories in China, the Singaporean economy will dealt a severe blow.
Impact on Construction Sector due to Worker Absenteeism and Distruption in Supply Chain
The National Development Minister of Singapore has stated that all workers returning from China will have to go on a 14-day leave of absence compulsorily. It applies to both foreign work pass holders as well as Singapore residents. It is also to be noted that almost 30,000 Chinese nationals working in Singapore on work pass had gone to their home country for the Chinese New Year festivities. This aside, the shortage of workers in the construction sector will also be aggravated owing to many workers not reporting to work due to fears of contracting the disease.
Also, China is a key supplier to Singapore when it comes to the building and construction sector, the prolonged disruption in cross-border trade will certainly deal a blow to businesses. Many importers in Singapore, for example, those importing building material from China, are staring at an indefinite delay owing to the shutting of many factories in China. Moreover, many materials are imported from China only after a visit by the local business owner to ensure the best quality and competitive prices. These may not land anytime soon in Singapore since visits to China is not a possibility at this point. It is widely known that the city-state’s housing market is a great driver of consumer confidence with every 9 in 10 citizens owning a house backed by loans from banks. The depression in the construction market will have a ripple effect on all sectors of the economy as construction is also an intensive employment generator.
Another underwhelming news emerging from this sector is that BuildTech Asia, a major building and construction tradeshow, which was to be held in March, is also staring at many exhibitors pulling out.
Silver lining for a select few SMEs and Startups
SMEs are a dominant force in Singapore. They are the foremost earners of foreign exchange and employ a large number of people. Coronavirus dented various sectors. However, there are a few select businesses that are seeing a surge in demand due to the disease outbreak. For example, online shopping and food delivery has seen an uptick, thanks to people not willing to step out much in an environment of increased vulnerability of contracting the disease. Foodpanda, the food delivery app, has confirmed that demand has swollen in the past few weeks, and directly attributed to coronavirus. Similarly, GrabFood Singapore, another player in the delivery space, is also processing more orders. E-commerce players are also witnessing a surge in demand for items that get seen as preventive measures during adverse times. In particular, demand for hand sanitizers and face masks has risen, besides the increased interest of buyers in thermometers and alcohol swabs. Although this may come as a blessing in disguise for these online businesses, the silver lining only has a limited positive impact since the more extensive market reels under the negatives of the disease.
The Response of the Singaporean Government
The authorities in the city-state acknowledged the concerns, and have promptly acted to limit the impact of coronavirus on people and on the economy of Singapore. The World Health Organisation (WHO) has declared novel coronavirus as a public health emergency, and Singaporean authorities are taking steps to tackle the impact on all levels. There are now facilities designated as government quarantine facilities (GQF) where people get moved when they are either if they have symptoms of 2019-nCoV, or confirmed as having contracted the disease or when they have had been in close contact with the former.
More than 500 people are now quarantined, the national development minister of Singapore has confirmed. Of all these, many are quarantined in their homes while the remaining are held in GQFs. To ensure, people adhere to quarantined rules, including not leaving the space and not coming in physical contact with another person, the authorities have declared penalties for instances of the breach, and these include fines, suspension of work pass, and even imprisonment. Singaporeans who have come back from China are necessarily given leave of absence of 14 days, only after which they can resume their normal activities. Those Chinese nationals who were holders of short-term and multiple-visit visas to Singapore can no longer enjoy this facility. Travelers who have been to mainland China in the last 14 days, denied both entries as well as transit facilities through the city-state. In case where the person has a Chinese passport but has not been in mainland China in the past 14 days, transit facilities through Singapore are available.
That the coronavirus has severely impacted not only China and its Wuhan city but also other countries in the world, especially those with close trade ties and those in the vicinity of China, is now a dominant truth. The hit will be experienced not only by businesses of Singapore that will be hurt but also by the common people in Singapore who live in constant fear due to significant number of confirmed cases and those quarantined as precautionary measures. Despite all this, however, coronavirus may not be a very long-term detrimental force, and the Singaporean economy will see revival given that businesses diversify their exposure to markets other than China.