First things first. WHO has declared the COVID-19 a pandemic. The agency has confirmed that more than 198,000 people have contracted the new disease, and at least 7,900 people across the world have lost their lives. Indeed, the impact is enormous. What started as an outbreak in Wuhan city of China has gradually gripped virtually the entire world. That the socio-economic effect of coronavirus or COVID-19 will be huge is now a harsh truth. Pandemics not only bring the national economy to a halt but also adversely impact global trade. It is the reason why not only China but every country in the world is looking for measures that could contain losses. Some of the central banks have cut interest rates to infuse liquidity. Many governments have declared their intention of spending more and shunning austerity measures for the time being.
The city-state of Singapore is staring at an uncertain future. Although the Covid-19 is perceived to make a not-so-harsh impact on the economy of Singapore, the worst-hit may include small and medium enterprises (SMEs). The economy registered the slowest growth in a decade in 2019. And the forecast for 2020 isn’t encouraging too. While previously, the government announced that GDP growth rate for the current year could be anything between 0.5 percent to 2.5 percent, this was cut to 0.5 percent to 1.5 percent lately. The primary force behind this cut in forecast was coronavirus. The Prime Minister of Singapore has expressed doubts overgrowth in the next couple of quarters, citing coronavirus as the negative force.
Together with COVID-19, the ministry of trade and industry (MTI) also cited the US-China trade war and tensions in the Middle East as factors impacting the GDP growth rate in Singapore. Further, the ministry noted a lack of demand from markets, including China, that will hit the manufacturing and wholesale sector of the city-state. China has closed many of its factories, and labor shortages due to lockdowns and isolations will see supply-chain disruptions impacting the Singaporean economy, the MTI has said. Next, the MTI cited is the decline in the number of tourists from China and the resulting hit on the transport sector. Finally, the drop in domestic consumption is set to impact retail and food services as Singaporeans have put on hold shopping and dine-out plans. What comes as a warning sign for all businesses, especially the SMEs, is that MTI hasn’t ruled out the possibility of recession in 2020.
Now, does this mean that the local SMEs of Singapore have no hopes in near-future? Will the pandemic shatter the dreams of expansions and the introduction of new products and markets? Let’s find out.
Where do numbers stand?
Singapore has been one of the worst-hit countries outside of China. The list includes South Korea, Italy, Iran, parts of Europe, and the United States, all of which are trading partners of the city-state. That aside, more than 266 confirmed cases of Covid-19 had been reported in Singapore. Of these, 114 cases have been discharged after they recovered from the disease. The most positive aspect is that the city-state hasn’t reported any causality due to this disease. It can be attributed to work undertaken by the government, which has even drawn praise from WHO. The WHO chief has praised the ‘all-of-government approach,’ and Singapore has been cited that has set an example for the world to follow to tackling the COVID-19 outbreak.
Numbers in Singapore aren’t as high as in countries like South Korea, Iran, and some of the European countries like Italy, Germany and Spain. It is a significant relief for the local people as well as businesses. However, the impact of global pandemic is quite apparent and we can’t be complacent. However, domestic consumption is one of the key pillars in the economy of the city-state. It means that the success of the government in containing the spread of disease within the borders of Singapore can eventually save the economy from doom. The government has said that leisure and dine-out activities will witness a downturn; however, some businesses can hope for an increase in demand. These include food delivery services and e-commerce. Startups in these categories, and also those in healthcare and medical services, may see a surge in demand for their services. For this to happen, however, the government shall stick to its policy of proactive approach towards COVID-19. The Foreign Minister, Dr Vivian Balakrishnan, of the city-state has said that this is an apt time to test Singapore’s quality of healthcare and standard of governance.
The Situation Beyond Singapore impacting SMEs
That SMEs are the most significant job providers in Singapore, and a significant earner of foreign currency is well-known. A study by FedEx Express found that Singaporean SMEs were top exporters in the Asia-Pacific region in 2017. With the outbreak of COVID-19 in every continent except Antarctica, global trade is set to imapct adversely. Countries such as China, Italy, and South Korea are virtually under a lockdown. In almost every other country, incoming passengers are getting screened, and any doubtful cases are compulsorily getting quarantined. Many business events that were scheduled to be held in Singapore in February and March, are either postponed or called off. The results have started showing. It has been reported that more than 300 retailers have pleaded with landlords for rebate in rent for at least three months ever since the disease outbreak has caused a dip in international tourists and local shoppers visiting the market. A decrease in footfall has severely impacted the malls.
Singaporean SMEs are exporters of electronics and parts and machinery to producers based in China and many other Asian and non-Asian economies. Now since the economies of these countries are facing a downturn due to n-coronavirus, it will directly hit SMEs where it hurts the most. Lack of demand for Singaporean goods in the overseas market will impact not only GDP growth rate but also the job sector. It is vital to note that despite a decade-low growth rate in 2019, Singapore produced more than 63,000 jobs. The manpower ministry has said that job growth last year was the highest since 2014. This one factor kept the economy afloat from any danger of recession or deflation in prices. The minister for manpower, however, has sounded anxious when it comes to job growth in 2020. Josephine Teo, the minister, has cited the outbreak as the cause for a lackluster job growth in the current year.
Analysts have noted that China is Singapore’s largest export market, and Chinese nationals make the most significant number of tourists. Now that China is locking down cities and shuttering businesses, besides imposing travel restrictions on citizens, this poses an imminent threat to the revenue stream of SMEs based in Singapore. As stated earlier, tenants have come together to ask for rebates from landlords in order to tackle the slowdown in business. These tenants include brands such as bag retailer Bagzx and maternity wear retailer Bove. One of the store operators has even confirmed cut in salaries of staff to cope with the dim outlook. Asking for rents to be halved for at least three months was the only alternative to closing the shops and going on a strike.
The Help in the Offing for Businesses
What Covid-19 has brought to Singapore beyond a healthcare crisis is now known. As per Financial Times, the near-empty seats at the Xin Wang Hong Kong Café in Singapore’s Changi airport have been cited as a perfect example of what the pandemic has done to the city-state. Changi is one of the busiest airports in the world, and a lack of passengers at terminals and quiet corridors and sitting areas speak volumes about the dent caused by the pandemic. The traffic at ports has also seen a hit, and this is reflective of the downside in trade. All this is a warning for local SMEs of the forthcoming days.
While the Singaporean government has been lauded by the WHO for its efforts in fighting against the coronavirus outbreak in the city-state, some measures to prevent the economy from sliding have also been taken. Singaporean SMEs can find relief in the government’s announcement of setting aside $6 billion to support not only businesses but also households and workers impacted by the COVD-19 outbreak. $4 billion package has been announced in the Budget 2020 for helping enterprises with their cash flow and to maintain jobs through monetary aids from the government. It has been accompanied by other expansionary measures in the budget, including a deficit of $10.9 billion to tide over the slowdown in the economy.
In the support outlined for businesses, defraying wage costs is a crucial aspect. This measure will reduce the financial burden on companies and help workers stay in the job. Rebate in corporate income tax is also in the offing, and companies can now get a 25 percent rebate subject to a maximum of $15,000. The government recognizes that the tourism sector has been worst-hit by the impact of the outbreak. Hence, property tax rebates and temporary bridging loan schemes have been rolled out. Tenants can also seek flexible rental payments where government agencies manage the property. For the aviation sector, the government has announced rebates on parking charges and aircraft landing. Direct support to households with cash payout to every Singaporean above the age of 21 will boost domestic demand.
All in all, the Covid-19 pandemic is a testing period for the Singaporean economy and the SMEs. That the domestic and international demand will below is certain. Singaporean exports and income from tourism activities will undoubtedly be impacted. However, the success of the Singaporean government in managing the outbreak and rolling out economic measures to tide over the crisis is commendable. Only time will tell the real impact of the pandemic, and until then, the SMEs are to make the best out of the support measures extended by the government.