Long‐run Effect of the Global Financial Crisis on Singapore's Tourism and the Economy
| Author | Anthony Chin,Xianming Meng,Bligh Grant |
| DOI | http://doi.org/10.1111/asej.12046 |
| Published date | 01 March 2015 |
| Date | 01 March 2015 |
Long-run Effect of the Global Financial Crisis
on Singapore’s Tourism and the Economy*
Xianming Meng, Anthony Chin and Bligh Grant
Received 10 September 2012; accepted 28 November 2014
This study employs recent Singaporean tourism survey data, the updated Singa-
porean input–output tables and a computable general equilibrium model to gauge
the long-run effects of the 2008 global financial crisis and selected policy
responses. The simulation results suggest that the global financial crisis has had
mild negative long-run effects on the overall development of Singapore’s
economy, and that the GST deduction policy ought to offset this negative effect.
Keywords: computable general equilibrium modeling, financial crisis, policy
response, Singaporean economy.
JEL classification codes: D58, E37, E62.
doi: 10.1111/asej.12046
I. Introduction
Singapore’s economy has historically been heavily reliant upon its ‘entrepot’
status because of limited natural resources yet advantageous geographical posi-
tion. Due to the efforts of Singapore’s government aimed at diversifying its
economy, the Singapore of today can be described as having a ‘two-pillar’
economy, with the manufacturing and service industries contributing most to
overall prosperity. Within the service industry, the tourism sector plays a key role.
In 2007, the Singapore tourism sector set a record of 10.3 million visitor arrivals
(STB, 2009) and generated US$9.4bn in tourism receipts, accounting for 3
percent of Singapore’s GDP (RNCOS, 2009). According to Euromonitor (2007),
Singapore is the world’s fourth most visited city in terms of visitor arrivals and
the third most preferred convention city destination in terms of the number of
meetings held in 2006. Nevertheless, the importance of tourism in the economy
has declined over time, as shown in Figure 1.
Figure 1 depicts the relative share of tourism receipts in services exports, total
services and goods exports, and GDP in recent years. The overall portrait
* Meng (corresponding author), UNE Business School, University of New England, Armidale,
NSW, 2351, Australia. Email: xmeng4@une.edu.au. Chin: Department of Economics, National
University of Singapore (NUS), 21 Lower Kent Ridge Road, Singapore 119077. Grant: Australian
Centreof Excellence for Local Government, University of Technology, Sydney, City Campus, Building
10, Lv 8, PO Box 123, Broadway, NSW 2007 Australia. This paper is dedicated to the memory of
Associate Prof. Anthony Chin at NUS, who sadly passed away before the paper was finalized. The
authors would like to thank two anonymous referees for their critical and useful comments.
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Asian Economic Journal 2015, Vol. 29 No. 1, 41–60 41
© 2015 The Authors
Asian Economic Journal © 2015 East Asian Economic Association and Wiley Publishing Pty Ltd
provided is that the share of tourism receipts declined consistently and consider-
ably during 1992–2003. Following this, the decline was much smaller and the
share stabilized. Given the increasing trend of tourism receipts shown in Figure 1,
the sharper decline of the share in services exports in Figure 1 indicates the
tremendous increase in services exports, especially in trade, financial services and
business services. These services accounted for more than 41 percent of total
value-added activity in the service industry in 2007 (MTI, 2008). The low shares
in total exports demonstrate the large volume of merchandise trade in Singapore.
The declining pace of tourism shares in total exports was slower than that of
tourism shares in service exports because merchandise exports increased steadily
but not as rapidly as services exports. The share of tourism receipts in GDP
dropped from 13.2 percent in 1992 to 4.1 percent in 2003. This decline indicates,
on the one hand, the markedly increased value-added economic activity in the
non-tourism sectors and, on the other hand, the small size and lack of tourism
resources in Singapore, which constrains the ability to attract more tourism
dollars. However, the shares of tourism receipts in GDP nevertheless stabilized at
approximately 5.0 percent from 2004 to 2009. They grew substantially from 2009
onwards. From Figure 1 it is reasonable to conclude that although inbound
tourism has recently played a less important role in the Singaporean economy, its
contribution to the economy is still very significant.
As a result of its openness and small size, the Singapore economy was severely
affected by the 2008 global financial crisis. In particular, its tourism industry was
Figure 1 Shares of tourism receipts from 1991 to 2011
32.5
37.9
37.5
32.4
28.2
26.6
22.5
28
23.9
22.3
18.5
16.7
1111.4
11.7
11.8
11.1
10.69.7
13.8
15.3
67.4 7.2 6.2 5.6 5.1 4.4 4.1 4.1 3.6 3.1 2.9 22.3 2.3 2.3 2.4 2.4 2.4 3.9 4.3
10.9
13.2
13.2
12.0
9.9 8.7 7.3 6.5 6.6 6.4 5.7 5.4 4.1 5.4 5.2 5.4 5.3 5.5 4.8 6.0 6.7
0
Year
5
10
15
20
%
25
30
35
40
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
As % in
Services
Exports
As % of
Total
Exports
As % of GDP
Source: Based on Annual report on Tourism Statistics (STB, 2000 to 2012).
ASIAN ECONOMIC JOURNAL 42
© 2015 The Authors
Asian Economic Journal © 2015 East Asian Economic Association and Wiley Publishing Pty Ltd
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