Economic Impact from COVID-19 on Singapore

4 Mr Desmond Choo asked the Minister for Trade and Industry in view of the global spread of COVID-19 (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.

The Senior Minister of State for Trade and Industry (Mr Chee Hong Tat) (for the Minister for Trade and Industry): Mr Speaker, Sir, the COVID-19 outbreak in China, Singapore and many countries in the region will adversely impact our economy.

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

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

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. 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.

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%" to "-0.5 to 1.5%". The current baseline view is that GDP growth for 2020, as an entire year, will remain positive, but reduced to around 0.5%. However, we know the COVID-19 situation is still evolving, and the total impact on our economy will depend on the length and severity of the outbreak. We will continue to monitor the situation closely.

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 workers in the near term, especially in the more badly affected sectors.

The Government will work together with employers and our unions to support our 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.

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, "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.

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.

Mr Desmond Choo (Tampines): I thank the Senior Minister of State for his clarification and reassurance that workers should be taken care of. I have three points for clarification. The first is on the packages of support for affected workers. It has been very warmly received by our workers in the transport sector, especially our taxi drivers. We do expect some impact on the manufacturing sector. Would there be support for this group of workers with some immediacy. The second one is on the delays in new investments. With the current situation in China and regional areas, do we expect new investments in Singapore to be delayed? While they are not or going to be cancelled, but do we expect the delays resulting in job creation, only coming down, further down the line, rather than in the coming few months? The third one is with the Singapore dollar easing and with exports of materials coming slower from China, do we expect then to have some inflationary pressure in the coming few months?

Mr Chee Hong Tat: Sir, the package to help companies and workers, some have already been announced. For other measures, the Minister for Finance will address these in the Budget Statement. The second question by Mr Choo with regard to new investments – because these are long term in nature – the current assessment is that they will not be affected. In fact, I would make an argument that how we deal with the current situation will affect how investors see Singapore in time to come. If we can deal with this calmly, cohesively, and show the world that Singapore, we have what it takes to inspire confidence and to deal with the situation in a professional manner and to bounce back and emerge stronger. I think then, we can turn this crisis into an opportunity to differentiate ourselves from our competitors.

Sir, the third question on the Singapore dollar, I think this depends on which sector we are talking about. And it actually brings the point to bear that is why we need to ensure that our supply sources are diversified. That is why we need to ensure that our supply chains are resilient. And that is why we also need to diversify our economic structure, our sectors and our markets. This is a very useful reminder to, not just for companies in Singapore, but companies throughout the world, that diversification, supply chain resilience, are all very important medium to longer term considerations. We should, even after we deal with this crisis, continue to press on with our restructuring efforts to improve our competitiveness to upgrade the skills of our workers, to transform our enterprises.

Mr Liang Eng Hwa (Holland-Bukit Timah): China is a country where many Singapore companies have successfully internationalised into. Given the grim situation in the Chinese economy now, can I ask the Senior Minister of State what does he see the impact to our Singapore companies in China, and whether there are ways and means that we can also assist them?

Mr Chee Hong Tat: Sir, it depends on the sector they are in. For tourism, for example, Chinese tourists currently make up about one-fifth of our total tourist arrivals. So, definitely there is an impact. For companies that rely on China for supplies or parts, there will be an impact. Companies that have workers who are currently in China, they have to come back in batches, because we need to make sure that we are able to protect public safety when these workers come back. All these will affect our companies.

Companies that have businesses in China are also being affected by the measures that are implemented in China to contain the outbreak.

If we look beyond the near-term, the prospects for companies to invest overseas, to expand their operations overseas including in China, I think that still remains an attractive market.

But going back to my earlier point, in my response to Mr Desmond Choo, we should not just put all our eggs in one basket. So, it is important that while we look at expanding our presence in China, our companies should also consider other markets including ASEAN, including India and even further away, Middle East, Africa and Latin America. This approach of having a diversified supply chain, diversified market is still the best medium to longer term strategy to develop our economy and to grow our businesses.

Mr Speaker: Er Dr Lee Bee Wah.

Er Dr Lee Bee Wah (Nee Soon): Thank you, Sir. I have one question. Yesterday, several contractors told me that they have Bangladeshi workers who wanted to go home to leave the work site and go back because some of the cases involved Bangladeshi workers. So, I would like to ask whether our Ministry is going to take any action to educate the workers to share with them so that they will continue to work in Singapore. Because this contractor says that if all these workers decide to leave Singapore, they cannot operate.

Mr Chee Hong Tat: Sir, I thank the Member for her feedback. I am sure this is something which the Government agencies will continue to work closely with employers to raise awareness, to educate our workers that the work environment that they are in will be safe and therefore, there is no need for them to worry.