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Sars-era injection may be what the doctor orders
ECONOMY watchers are holding up Singapore's S$230 million Sars (Severe acute respiratory syndrome) relief package of 2003 as a guide on what to prescribe for ailing businesses, as tourism-related sectors stare down the mystery killer virus from Wuhan.
"We could be looking at something of that size if the crisis isn't contained soon," Anwita Basu, head of the Asia country risk research team at Fitch Solutions, told The Business Times.
Minister for Trade and Industry Chan Chun Sing told a briefing on Monday that the government is looking at support measures for issues such as business costs, cash flow and staff retention - similar to the shot in the arm offered during the Sars epidemic.
The Sars package included property tax rebates for shops, restaurants and hotels; working capital loans for small and medium-sized enterprises (SMEs); and lower foreign worker levies for certain hotel staff.
Now, Ms Basu noted that, with a general election on the horizon, "we expect that the government will provide as much support to consumption and retail as they possibly can" - such as "targeted solvency support for SMEs" if the Wuhan virus persists.
Lee Ju Ye, economist at Maybank Kim Eng, even proposed some ways that a Wuhan virus package could go beyond Sars relief - such as by extending the foreign worker levy reduction to not just hotels but also food and beverage, given the pinch from an earlier quota cut in the service sector.
"The two integrated resorts - which didn't exist in 2003 - may also receive some direct relief," she added. "We also expect to see a higher Budget allocation to the environment and healthcare sectors as the government spends more on preventive measures, such as more stringent health checks in airports and hospitals, and cleaning of public areas."
Meanwhile, Margaret Heng, executive director of the Singapore Hotel Assocation, is calling for relief measures such as a full property tax rebate and the suspension of all business licence fees for the industry, as well as a lifting of foreign worker levies and an expanded pool of foreign workers, including through the rollback of quota cuts.
At the same time, Singapore Business Federation chief executive Ho Meng Kit told BT: "It is premature to recommend specific measures to address any potential impact the situation might have on our businesses."
But, in the wake of Mr Chan's statement that the Ministry of Trade and Industry is working closely with trade groups on support measures, Mr Ho added: "We agree that short-term measures, if and when implemented, should focus on addressing cash-flow issues, reducing business costs and preserving as many jobs as possible."
Still, DBS senior economist Irvin Seah suggested that rescue measures that address business costs and liquidity might already be baked into the Budget - which is set to be delivered on Feb 18 - as they are "part and parcel of providing support for corporates" and will be welcome whether or not an epidemic rages on.
And, with the outbreak still at an early stage - the first case here was announced on Jan 23 - some analysts are leaning towards more aid coming after the Budget, rather than during.
Remarking that the Budget is unlikely to be an "epidemic package", Mr Seah said that funds may be set aside for later, "but longer-term issues remain the key focus" for Budget policy.
Soh Pui Ming, head of tax at Ernst & Young Solutions, agreed that the Wuhan virus "will not significantly change the Budget measures unless the situation gets much more severe over the next two weeks". Instead, the government can offer relief at a later date when it can read the situation better, she said, citing both Sars and the Asian Financial Crisis in 1998.
Low Hwee Chua, regional managing partner for tax and legal at Deloitte, also said that measures could be tailored to "the most adversely hit sectors", such as tourism and transport, in the off-Budget season - especially with the full impact of the Wuhan virus on the Singapore economy "still unclear at this juncture".
Indeed, the scale of the fall-out is another unknown for a battered economy that had been limping its way to recovery, after trade tensions and an electronics manufacturing slump.
Fitch Solutions has tipped the Wuhan virus as a downside risk to its forecasts for Chinese and global growth, with Ms Basu adding: "While it is too soon to decipher the exact economic impact of the Wuhan contagion on the Singapore economy, we note that, based on Singapore's experience with the Sars outbreak in 2003, we are likely to see some short-term slowing in tourism and retail sectors."
Back then, Sars prompted the government to slash its growth forecast for that year to between 0.5 per cent and 2.5 per cent, against an earlier projection of 2 per cent to 5 per cent.
But, while OCBC chief economist Selena Ling called the virus "a dark cloud that could potentially morph into a black swan event", she also said that it is "still premature to quantify the downside risk" to Singapore's outlook for 2020, which officially ranges from 0.5 per cent to 2.5 per cent.
Similarly, Ms Lee said that, while consumer-related sectors could take a hit, exports and manufacturing seem to be recovering and "will likely be relatively immune" to the virus.
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