Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Monetary policy wikipedia , lookup
Fiscal multiplier wikipedia , lookup
Non-monetary economy wikipedia , lookup
Business cycle wikipedia , lookup
Chinese economic reform wikipedia , lookup
Economic growth wikipedia , lookup
Gross domestic product wikipedia , lookup
Living with SARS: The Economic Consequences on Singapore Edward Robinson Economic Policy Department Monetary Authority of Singapore 2 August 2003 Outline of Presentation • • • • • 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 ~