Transcript Tier 1 - Economic Society of Singapore

Living with SARS:
The Economic Consequences
on Singapore
Edward Robinson
Economic Policy Department
Monetary Authority of Singapore
2 August 2003
Outline of Presentation
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•
•
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Business Cycles in Singapore
The Economy Pre-SARS
Diagnosis: The Q2 Impact from SARS
Post SARS: The Initial Upturn
Support Provided by Macroeconomic
Policy
Business
Cycles
in
Singapore
GDP Growth from 1980
15
YOY % Growth
80
Singapore’s
Real GDP (LHS)
60
10
40
5
20
0
0
-5
Composite
Foreign
GDP (LHS)
Global Chip
Sales (RHS)
-20
-10
-40
-15
1980
-60
1984
1988
1992
1996
2000
2003
Q2 (est.)
YOY % Growth
20
World Demand-Domestic Supply Curve
DS1
Price Level
(Domestic
currency)
WD1
WD2
Q2
Q1
Real GDP
Fall in
External Demand
Drop in
Exports
Businesses' Profit Margins
Squeezed
Dynamics of
a Downturn
Cutback in Investment
Spending
Cutback in Labor Costs:
Wage Cuts,
Shorter Work Weeks,
Retrenching Workers
Private Disposable
Income Falls
Consumer
Sentiments Down
Drop in
Consumer Spending
Decline
in GDP
A Different Kind of Shock
SARS:
A Medical
Emergency
Direct
Impact on
Consumer
Behaviour
Globalisation
People
Shun
Crowded
Places
Negative
Impact on
Commerce
Sector
GDP
Growth
Exposure to
Foreign Risks
The
Economy
Pre-SARS
Recovery derailed by uncertainties…
GDP Profile of Various Recessions in Singapore
Index, Seasonally Adjusted
114
112
110
108
106
1998 Asia Financial Crisis
Trough = Q3 98
1985 Recession
Q2 2002
Trough = Q4 85
104
102
100
98
2001 Downturn
Trough = Q3 01
96
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
quarters
… as manufacturing output
levelled off due to geopolitical
uncertainties…
Q3 01
Index (Q3 2001=100), SA
135
130
Manufacturing
Value-added
125
120
115
110
105
100
95
Q1
2001
Q2
Q3
Q4
Q1
2002
Q2
Q3
Q4
Q1
2003
The Q2 Impact from SARS…
Verily I say unto you;
where art thou,
my patrons?
Four Stages of an Epidemic
Denial
Impact/Fear
 Low public
awareness
 Greater public
awareness
 First fatality
reported
 Fear factor
 Economic activity
disrupted
 Heightened
uncertainties &
risk aversion
 Stepped up
measures to
prevent the spread
of the disease
 A few months
 1-2 quarters
Possible
Relapse
Acceptance
 Public
accustomed to
epidemic
 Fears dissipated
 Partial
resumption of
economic activity
 Intensive
research on cure
 Up to 4
quarters
Recovery
 Infection rate
tapers off
 Economic
activity slowly
returns to precrisis levels
 Underperformance for
several years before
returning to trend
Timeline
The outbreak had disproportionate
impact on the various sectors…
Tier 1:
Severely
Affected
Hotels
Air Transport
The outbreak had disproportionate
impact on the various sectors…
Tier 1:
Severely
Affected Hotels
Air Transport
Tier 2:
Significantly
Affected
Restaurants
Retail
Land Transport
The outbreak had disproportionate
impact on the various sectors…
Tier 1:
Severely
Affected
Hotels
Air Transport
Tier 2:
Significantly
Affected
Restaurants
Retail
Land Transport
Tier 3: Moderately
Affected
Real Estate
Stock broking
The outbreak had disproportionate
impact on the various sectors…
Tier 1:
Severely
Affected
Hotels
Air Transport
Tier 2:
Significantly
Affected
Restaurants
Retail
Land Transport
Tier 3: Moderately
Affected
Tier 4: Less
Affected
Real Estate
Manufacturing
Stock broking
Construction
Post and
Communication
Wholesale
Sea Transport
Services Allied to
Transport
Tier 1 Travel Related Segments
State in Apr-May: Critical Condition
Visitor Arrivals
Air Passenger
Air Passenger Grow th (RHS)
85
30
YOY Grow th
80
700
500
-30
400
300
-60
200
100
-90
Jan Jul Jan Jul Jan Jul Jan May
2000
2001
2002
2003
Ratio
0
YOY % Growth
Thousands
600
75
Passenger Load Factor (LHS)
30
20
10
0
70
-10
65
-20
60
55
-30
-40
-50
50
-60
45
-70
Jan Jul Jan Jul Jan Jul Jan May
2000
2001
2002
2003
YOY % Growth
800
Level (SA)
Tier 2 Domestic Oriented Segments
State in Apr-May: Weak Condition
Retail Sales Volume
Level
20
YOY Growth
180
10
160
0
140
-10
120
-20
100
-30
Jan
2002
Apr
Jul
Oct
Jan
2003
Apr
YOY % Growth
Index (1997=100)
200
Tier 3 Asset Markets
State in Apr-May: Moderately Affected
135
US (NASDAQ)
Trough = 100
125
US (DJIA)
115
Singapore
(STI)
105
95
Jan
Feb
Mar
Apr
2003
May
Jun
Jul2
Domestic Demand-Supply Curve
DS2
Price Level
(Domestic
currency)
DS1
DD1
DD2
Q3
Q2
Q1
Real GDP
Deadweight Cost to Society
DS2
Price Level
(Domestic
currency)
DS1
DD1
DD2
Q3
Q2
Q1
Real GDP
Support
Provided by
Policy
Fiscal Support
Tourism-related
Industries
$155m
Transport
Industries
$73.5m
Courage Fund
$14.8m
Expansionary
Fiscal Policy
off-budget packages
Monetary Support
Flexible Mgt of S$
Low Interest Rates
Conducive
Monetary
Conditions
Support Provided by Policy
DS2 DS3 DS1
Price Level
(Domestic
currency)
A
B
DD1
DD2
Q3
Q2
Q4
Q1
Real GDP
Post-SARS:
the
Initial
Upturn
MOM SA % Growth
80
90
Hotel Occupancy
Rate (RHS)
60
80
40
70
20
60
0
-20
-40
Visitor
Arrivals
(LHS)
-60
-80
2000
50
Air Passengers
Handled (LHS)
40
30
20
2001
2002
2003 Jun
Hotel Occupancy Rate (%), SA
Travel-related sectors saw a
modest turnaround around end-Q2
Manufacturing sector could see some
recovery going forward
125
11
Index of Industrial
Production (LHS)
115
10
110
9
105
Non-oil
Domestic
Exports (RHS)
100
8
95
90
7
2000
2001
2002
2003 Jun
Recession Unlikely, Q3 growth positive,
Improvement in Sars hit sectors
$ Bn, SA
Index (1999=100), SA
120
Outlook for Growth
Easier
Monetary
Conditions
Weak External
Demand?
Expansionary
Fiscal Policy
multiplier effect
Support for the
economy
GDP Forecast Range
0.5 – 2.5%
2nd Wave
of Infection?
* Key Points *
Singapore hit by increasing frequency of shocks
Sars was different in nature
• Medical Emergency
• Both DD/SS Effects
• Sectoral Specific
Economic Resilience
• Strong Institutions
• Decisive Govt Response
(Medical+Economic)
• Flexibility in Markets
• Social Cohesion
~ Thank You ~