September 19, 2008
Financial turmoil to dampen Singapore tourism growth
The turmoil in global financial markets will help put the brakes on Singapore's tourism industry, which was hoping to tap into the growth of Asia's middle-class and the world's first night-time Grand Prix, reported Reuters.
Analysts said the first Formula One race to be held in Singapore this month will provide a fillip for a cooling tourism sector, but high oil prices, a weak global economy and sagging financial markets will crimp the travel business this year.
"This is a very glamorous and high profile event but it has low productivity," said Song Seng Wun, an economist from CIMB. "A weekend of good pharmaceutical output will have a far greater impact than a weekend of F1," Song said.
"It will boost tourism in September, but a slowdown in tourism is certainly on the cards," he said.
Singapore has been trying to move away from manufacturing into service industries such as finance and tourism to diversify its $170 billion economy.
A downturn in tourism, which makes up about six percent of the economy, will be an additional drag to slowing growth. Some economists say Singapore may slump into a technical recession -- usually defined as two consecutive quarters of growth contraction -- in the third quarter.
A slowing global economy and the deepening credit crisis have taken a toll on Asia's travel business this year after growing 25 percent every year from 2004 to 2007, said Matthew Hildebrandt, an economist at JPMorgan.
Singapore received fewer visitors for the first time in four years in June. Tourism businesses in China, Japan and Malaysia have cooled this year as well, Hildebrandt said.
Singapore's Tourism Board said last month Singapore may miss its target of drawing 10.8 million visitors this year.
The Formula One race will be in a street circuit over three days from Sept. 26 and is expected to attract 40,000 visitors from abroad, the Singapore Tourism Board said.
The race will eventually help Singapore earn about S$100 million ($70 million) a year in tourism revenue, but the Tourism Board declined to say when the target will be achieved.
The Grand Prix race is the Southeast Asian country's latest effort to turn into a livelier city. Two casinos worth up to $9.4 billion will open from the end of 2009.
As Singapore continues to modernise its economy, tourism should continue to account for much less than 10 percent of the country's GDP, Hildebrandt said. The sector was worth 9 percent of GDP in Hong Kong, he said.
The government expects its export-dependent economy to grow at the lower end of a 4-5 percent forecast in 2008, well down on last year's strong 7.7 percent expansion.