Saturday, June 22, 2013

Haze may hurt economy if conditions don’t improve, analysts say

21 June 2013


SINGAPORE - Economists said the thick haze that is shrouding Singapore could potentially cast a pall over its economic growth if the situation does not improve in the coming months.

CIMB Research estimated that for each day the haze lingers, over S$60 million in tourism receipts could be at stake.

klapsons The Boutique Hotel, located in Singapore’s central business district, has shut two outdoor dining outlets for now as air quality remains in the unhealthy range.

The two outlets contribute about 40 per cent of the hotel’s revenue.

It said some guests have also decided to give Singapore a miss.

Ms Anna Tong, general manager at klapsons The Boutique Hotel, said: “Our customers are business people. So as they come to Singapore to do business and because regionally it is known that the haze is really affecting our part of the world, so they have redirected their travel plans and gone somewhere and hopefully come back later. So we did have some cancellations of about maybe 12 per cent of our occupancy.”

Meanwhile, the crowd at Boat Quay, a popular spot with tourists and office workers, has also thinned.

Some F&B operators at Boat Quay said earnings have dropped by more than 50 per cent in the last two days and some customers have also cancelled their reservations.

As business slows down, some operators said they will probably cut back on the hiring of part-time staff.

If the haze persists throughout the third quarter, economists said it could potentially hurt Singapore’s economy, which is expected to grow by between 1 and 3 per cent this year.

Mr Alvin Liew, senior economist at United Overseas Bank, said: “We did some back-of-the-envelope numbers looking at weakening in the key sectors due to this haze. We think it could affect anything from 0.3 to maybe 0.5 percentage-point of headline growth this year. Our growth forecast this year is looking at 3 per cent growth, so it may be lower at 2.5 per cent.”

Last year, over 14 million tourists visited Singapore, spending some S$23 billion.

Economists said the growth picture could get cloudy if they stay away.

In response to Channel NewsAsia’s query, the Singapore Tourism Board said it is premature to determine the extent of the impact of the haze on the tourism sector, and it is monitoring the situation closely.

Meanwhile, the construction sector - another important growth driver - may be affected if the government issues a stop-work order.

Mr Song Seng Wun, regional economist at CIMB Research, said: “If we were to put the two together… (If) 5 per cent from the construction sector stop work, in the hospitality-related tourism industries another 5 to 6 per cent, that’s 10 per cent of Singapore’s economy. If assuming everything remains constant, that can potentially be knocked off the Singapore economy, so it can make a difference between growth and contraction in that worst-case scenario.”

On top of that, a decline in economic activity could also affect productivity.

But economists said even if Singapore’s economy takes a hit in Q3, it should rebound fairly quickly in the following quarter once the haze clears, and assuming the global economy holds up well.


[Assuming their estimates are correct at $60m a day, it would be $1.2billion in 20 days and almost $2b per month. If this haze goes on for about a month and diverts tourists and tourism dollars for a month, we would lose almost $2b each year because of the haze. If there is uncertainty as to when the haze starts and when it ends, there would be gradual tapering and ramping up of tourists before and after the usual Haze period.]

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