Singapore’s Banking Industry Braces Itself For Negative Impacts Of The Coronavirus
The Coronavirus threat is not one that the world is taking lightly and not just for health reasons but also because of the effects that the viral threat may have on economic performance. Singapore’s banking industry has already started to feel the heat as concerns loom over the impact on the outbreak on the earnings and loan growth figures of Singapore’s banking institutions.
There is a good explanation of why the Coronavirus may cause volatile earnings and weaker growth. Roughly 20 percent of all the tourists that visit China every year are from China. It is thus safe to say that the Chinese contribute heavily to various industries, including the airline industry, tourism, and hospitality, thus contributing significantly to Singapore’s economy. The disruptive nature of the Coronavirus may thus have a significant impact on the above industries.
Ivan Tan, a credit analyst at S&P Global Ratings, noted in a statement that the Coronavirus outbreak will likely negatively affect business and consumer confidence in Singapore, thus reducing the demand for credit. This means that banks will take a hit if the demand for credit is low
Singapore’s government already issued strict restrictions against any travel from China to Singapore. The travel restrictions will prevent Chinese tourists from visiting Singapore until the Coronavirus threat is subdued. But that’s where the problem comes in because the tourism industry and other industries that rely heavily on tourism have already started to feel the effect.
If the Coronavirus threat continues, then the negative impact will also extend beyond hospitality, tourism, and airlines to other sectors such as banking and even retail. For example, malls that are popular with tourists might be affected, and this also translates to lower consumer spending. According to S&P’s estimates, general commercial and transport sectors cover anywhere from 4 percent to 10 percent of the domestic loans in Singapore, which represents significant exposure.
S&P is, however, noted that Singapore’s banking industry is financially sound, and it enjoys strong profit levels. This means that they can manage the impact of the Coronavirus over the short-term, but it might become more challenging if the health threat extends to more than a few months. Just to put things into perspective, if the Coronavirus threat prevails for longer than expected, there will be job losses in general commercial sectors and the tourism industry. Credit card repayments will go down, and so will mortgages.
The world is currently watching China see how the situation will unravel. There is no doubt that global concern has been rising, especially due to fears that the Coronavirus will spread beyond China. It is currently unclear whether the authorities will manage to contain the situation, especially with reports of some coronavirus cases outside China popping up. Meanwhile, the relevant health authorities are working round the clock to come up with a cure or vaccine that will help end the Coronavirus nightmare.
There is still a lot of uncertainty over the whole situation, and so it is difficult to tell just how much it will affect economic performance not only in China but also in other countries, especially those in South-east Asia. Meanwhile, Singapore banks are fully aware of the potentially huge impact of the Coronavirus outbreak. However, they are counting on the country’s supportive government to intervene in case things get worse.
Singapore’s government recently pledged to offer support to some of the country’s industries that have been affected by the Coronavirus, such as tourism and transport. However, the government has not announced any measures so far. Meanwhile, some of the banks that have operations in Macau and Hong Kong have shut down some of their branches in the affected areas.