Singapore’s economy chokes on smog

Some Singapore restaurants were almost deserted during the normally busy Friday lunch period.

SINGAPORE: The severe smog over Singapore caused by forest fires in Indonesia could hurt the city-state’s economy if it persists for weeks, economists said Friday as the pollution index hit new record levels.

Tourist spots are shutting down, companies are allowing staff to work from home and a VIP airport has suspended operations. Some Singapore restaurants were almost deserted during the normally busy Friday lunch period.

As thick grey smoke and the acrid smell of burning wood and grass smothered the city-state for a fifth day running, economists said tourism in particular could suffer from Singapore’s worst environmental emergency since the 1997 haze crisis.

Singapore Prime Minister Lee Hsien Loong said Thursday that the problem “can easily last for several weeks, and quite possibly longer until the dry season ends in Sumatra”.

The season lasts from June to September.

“The impact on Singapore from the Indonesian haze is particularly severe this year, and could become worse than 1997,” said Rajiv Biswas, Asia Pacific chief economist at research firm IHS Global Insight.

“If the haze persists over the coming weeks during the seasonal slash-and-burn period in Sumatra, it has the potential to have significant negative effects on the Singapore economy.

“Images of the haze enveloping Singapore are being widely reported on TV channels and other media globally, and can be particularly damaging to Singapore’s world-class tourism industry.”

Tourism is a revenue-spinner for Singapore, a tiny city-state that has designed itself as a regional hub for everything from hosting conventions to managing the wealth of the world’s millionaires.

Singapore welcomed 14.4 million visitors last year who generated Sg$23 billion ($18 billion) in tourism-related revenues. The sector contributed 4.0 percent directly to the gross domestic product (GDP).

“If the number of tourist visitors fall sharply even for several months, this will hurt Singapore’s GDP numbers for the third quarter of 2013,” Biswas said.

He noted that such a decline would come at a time when Singapore’s manufacturing sector, a traditional pillar of the trade-driven economy, is hurting from weak orders, particularly for electronics products, from its main markets the United States and Europe.

“It’s a bit of a disappointment that you can’t really see the towers or the buildings. And it’s a bit dark,” said 26-year-old British tourist Amy Jones, referring to Singapore’s famous Marina Bay Sands casino complex which looks like a curved ocean liner perched on three hotel towers over 50 storeys high.

Aquatic park shut

Jit Soon Lim, head of equity research for Southeast Asia at Nomura Singapore Ltd, said domestic consumption will also suffer as residents stay indoors.

Singapore’s GDP is expected to grow between 1 and 3 percent this year, according to official forecasts.

The Pollutants Standards Index rose to an all-time high of 401 at midday Friday, a level deemed as potentially life-threatening to ill and elderly persons if it persists over a 24-hour period.

Wild Wild Wet, a popular aquatic park in the island’s eastern suburbs, was shut down along with the Singapore Flyer, the world’s biggest Ferris wheel.

Jurong Bird Park was open but outdoor shows have been cancelled.

Seletar Airport, which services the private jets of VIP guests, was also closed “as a result of prolonged poor visibility caused by the haze,” authorities said.

The main Changi Airport remains operational.

Non-essential employees at Malaysian bank CIMB were allowed to work from home and staff were given N95 masks, which block out 95 percent of airborne particles larger than 0.3 microns, said the lender’s regional economist Song Seng Wun.

But one sector is a direct beneficiary of the haze problem — surgical masks are in short supply because people have been buying them in great numbers from pharmacies.

Southeast Asia’s worst haze crisis took place in 1997-1998, causing widespread health problems and costing the regional economy billions of dollars as a result of business and air transport disruptions.