Singapore's economy likely to be amongst the worst-hit by Wuhan virus

Tourism-related sectors will be the most affected.

Singapore is sighted to be amongst the most affected markets in ASEAN by the Wuhan coronavirus and will see growth downgrades as a result of its impact, reports Maybank Kim Eng.

Amongst ASEAN countries, the report counts Thailand alongside Singapore as the markets whose economies are most at risk from the effects of the virus. Malaysia and Vietnam are expected to see a smaller negative impact, whilst Indonesia and the Philippines will probably be least affected, according to Maybank analysts Chua Hak Bin, Lee Ju Ye and Linda Liu.

Singapore was amongst the hardest hit during the 2003 SARS crisis, where 238 people were infected and 33 died. By sector, tourism-related sectors such as hotels and air transport were the most affected, followed by restaurants, retail and land transport sectors. Maybank noted that the impact of the 2019 coronavirus outbreak could follow the same pattern.

The transport industry is at risk given Singapore’s status as the regional air transport hub. The country topped OAG’s connectivity index in Asia, with Changi Airport handling 66 million passengers in 2018, compared to only 29 million in 2003.

Further, Singapore welcomed more than 3.35 million mainland Chinese visitors from January to November 2019, almost equal to the 3.4 million visitors recorded for the whole year of 2018, data from the Singapore Tourism Board revealed.

Both retail sales and F&B services fell for two consecutive quarters during the SARS crisis in 2003, and Maybank Kim Eng expects to see a similar situation. However,
similar to China, the blow may be softer due to the rise in online retail sales, which accounted for around 6% of total retail sales and food delivery services in 2019.

In contrast, Retail S-REITs could be majorly affected by prolonged travel restrictions especially as Chinese tourists contribute about 20% of total tourism receipts and as much as 72% of total shopping receipts. China’s malls are directly exposed, with S-REITs with China assets sold down by 6-10% since 28 January 2020, the report added.

With these the government may lower foreign levies for hotel and F&B industries as part of its measures to help firms affected by the Wuhan virus. In 2003, $2m was allocated for a 50% reduction in foreign worker levy for unskilled workers in gazetted tourist hotels.

Property tax rebates may also mirror the SARS package, which consisted of a $56m allocation for additional property tax rebates for commercial properties, and $8m for higher property tax rebates for gazetted tourist hotels.

The Ministry of Trade & Industry had announced earlier this week that it will roll out measures to help firms affected by the Wuhan virus, particularly targeting tourism and consumer-related sectors. The upcoming Budget 2020 may include some of the measures, similar to the SARS relief package that was introduced in April 2003, the report added.