The coronavirus outbreak has hit businesses hard, with many firms expecting revenue to drop by as much as 50 per cent.
While the Budget has proposed measures to help front-line sectors like tourism tide over this challenging period, a broader range of firms, including those in manufacturing, also need help, say experts.
They met last Wednesday for a roundtable session organised by The Straits Times and United Overseas Bank (UOB) to discuss initiatives announced in the Budget. The session was moderated by ST associate editor Vikram Khanna.
Panellist Ho Meng Kit, who is Singapore Business Federation chief executive, said a survey by his organisation the week before found that about 80 per cent of respondents expected revenue to drop by half.
About 85 per cent of businesses surveyed were small and medium-sized enterprises.
Mr Ho said: “The picture is not good. They say that Singapore’s economy this year will be adversely affected, and that companies themselves will be adversely affected.”
A fellow panellist, UOB senior economist Alvin Liew, noted that, during Sars, the epicentre of the outbreak was Hong Kong, but with the coronavirus outbreak, the epicentre is China – meaning a vital difference in impact.
He said: “China is the biggest trading partner for many of the economies around here, including Singapore, and the second-largest economy in the world, and that naturally will have impact on a lot of the demand within the region.
“Supply chains will be disrupted and affected, at least in the near term.”
The loss of the huge share of tourists from China will also have an impact on the tourism and aviation industry in various locations, he noted.
He added that a recent study showed that regional economies, including Singapore, could see their growth reduced by 0.5 to 1 percentage point this year.
Last week, the Ministry of Trade and Industry (MTI) downgraded its economic growth forecast for the year to between minus 0.5 per cent and 1.5 per cent – indicating a possible recession – two or more consecutive quarters of negative growth, due to a weakened outlook after the coronavirus outbreak.
Growth is expected to come in around 0.5 per cent, the mid-point of the forecast range. Last November, the ministry had predicted an expansion of between 0.5 per cent and 2.5 per cent for this year.
Nominated MP Walter Theseira, who is also an associate professor of economics at the Singapore University of Social Sciences, told the panel that the impact of the coronavirus crisis would also be greater than the Sars outbreak in 2003 because the world is much more interconnected.
“Supply chains now are so dependent on China and so tightly interlinked. Businesses also are under tremendous pressure to be very lean with manufacturing, with their supply chains in China shutting down for longer than anticipated.”
Experts’ take on the measures
With the coronavirus outbreak, this year’s Budget had to address challenges in both the short and long term.
At The Straits Times-UOB Budget Roundtable last Wednesday, two economists, a business chamber leader and a labour MP shared insights on the measures.
During the hour-long discussion, the four panellists discussed the economic impact of the coronavirus, who will benefit from the new measures and what workers and enterprises can do to weather the storm.
• Mr Alvin Liew, senior economist at United Overseas Bank
• Mr Patrick Tay, MP for West Coast GRC and assistant secretary-general of NTUC
• Mr Ho Meng Kit, chief executive of the Singapore Business Federation
• Associate Professor Walter Theseira, economist at the Singapore University of Social Sciences and Nominated MP
• Mr Vikram Khanna, associate editor of The Straits Times
Factories and businesses usually close during Chinese New Year, but this year’s shutdown was prolonged in many places because of the coronavirus outbreak.
“You are seeing those weaknesses having a ripple effect in supply chains, in manufacturing throughout the world. And that’s why the effect will not be as localised or as short term as Sars was – the world has become so much more globalised in that 1½ decades since,” Prof Theseira said.
Hence, the implications of the virus crisis go beyond the five sectors identified in the Budget: tourism, aviation, retail, food services, and point-to-point transport services.
Manufacturing, shipping and even pharmaceuticals might also be hit.
Labour MP Patrick Tay, who is also the National Trades Union Congress assistant secretary-general, observed that manufacturers have a larger number of foreign workers, with some who might still be stuck in China unable to return.
“And, interestingly, it is not just manufacturing,” he told the session. “I know a number of multinational corporations, including pharmaceutical companies that have the research and development facilities and laboratories in China, and in the hundreds. So I think that will have an adverse effect on the overall development of drugs and medicine, for instance.”
Mr Ho said the Budget contained many measures, including tax rebates and defraying wage costs to help workers stay employed.
But more is needed, especially in helping companies with manpower issues.
He said: “Some foreign workers are stuck in China and they (companies) have no access to labour. They’re spending a lot more on manpower cost because of leave of absence, medical certificates and they have got to do extra cleaning and essential services.
“They’re asking for assistance in manpower cost, finding labour.
“So these are exceptional times for the businesses.”
STAYING THE COURSE
Overall, the panel agreed that it was an expansive Budget that addressed short-term problems like the coronavirus, while keeping an eye on longer-term needs.
Mr Tay said: “We address some of the short-term challenges that we need to overcome, while not forgetting the fact that we still need to look at the medium and longer term, especially with… technological changes… and local economic transformation.
“I think, on the whole, it helps us to stay ready for the present and for the future as well.”
Prof Theseira said that as a Budget delivered at the end of a term of government, it is about staying the course and continuing the economic transformation measures that were put in place earlier.
Mr Ho added that the handling of the virus crisis so far by the Government and in the Budget has instilled confidence.
“I think it’s important for us, particularly the business community, to have that sense of confidence. It’s not all gloom and doom,” Mr Ho said.
“This will blow over and this part of the world is going to grow.
“There are many opportunities for us. I think we shouldn’t lose sight of the fact that there’s a big market that we can tap, and we all will be in a better place following the crisis with confidence.”