the demand for the services lowers
D1 represents the demand before the pandemic, and D2 shows the demand during the on-going pandemic, which has decreased. P1 and P2 indicate the equilibrium price of travel while Q1 and Q2 show the equilibrium of the airline services. The decrease in the airline services makes the demand curve shift leftwards (D2) as the quantity that is supplied is more than what is demanded at the original cost, thus leading to the surplus of the available airline amenities. The availabilities of the services cause their price to down. When the prices of travel decreases, the quantity demanded is likely to rise while the supplies go down where it stops when the surplus is removed at the new equilibrium. When the demand for the services lowers, it leads to a decrease in the equilibrium price as well as the equilibrium quantity of the airline services.
One key industry that has been affected by the pandemic in Singapore is the air transport industry. In the wake of the Covid-19 problem across the globe, Singapore Airlines (SIA) has suspended most of the services (Abdullah, 2020) The decision came during the unprecedented time when most of the countries across the world have imposed border control.
SIA continues to cut its capacity by considering that there has been a growing scale of the border control restrictions.
Prior to the outbreak of the pandemic, SIA operated more than one hundred flights on a weekly basis between India and Singapore (Duddu and Praveen, 2020). Nevertheless, when the Indian government suspended all visas, the airlines had to cancel most flights to India. The suspension has a significant economic impact to the airlines as well as the economy of Singapore.
Changi Airport is the Singapore central airline hub. In March, the airport had a 32.8% decrease in passengers’ movement compared to the same period in 2019. Also, its seat capacity went down at a high rate. The SIA CEO confirmed that the airline had lost a greater amount of its traffic for the very short time of the pandemic outbreak (Abdullah, 2020). Additionally, the pace of this deterioration is likely to accelerate.
It is said that SIA will cut its capital spending for the current financial year by at least 12% as compared to its previous plan. Besides, the final reduction will be determined by talks with its plane makers based on delivery delays. Currently, its forecast is S$5.3 billion or less by the end of the current financial year as compared with S$6 billion in last year November before the pandemic distracted the demanded that led to the grounding of most of the fleet (Daga, 2020)
SIA has recently reported its first-ever financial year loss, citing to the low fuel hedging bets as well as the collapse of demand of its services during the challenging time of coronavirus pandemic. Also, the airlines stated that recovery timing is likely to be uncertain. The cargo capacity has not suffered as much. It is estimated to have dropped to 60% as it is maximizing the use of freighter fleet through empty passenger jets to transport cargo and ad-hoc charter flights.
As a result of these challenges, SIA has secured funding to help it see through the crisis and enable it to expand after the pandemic. The financing package is one of the biggest announced by the airline since the demand plunged. This financing plan drove its shares down by 10.5 %. Also, it has acquired an additional S$4 billion loans with DBS Group Holding Ltd to support its liquidity until it can secure funding from its rights issue (Daga, 2020).
The current spread of coronavirus has been a public health crisis that has posed a severe risk to the economy through the halt in production activities, the interruption of the movement of people, and the cut-off of the supply chains (Duddu and Praveen, 2020). Additionally, the longevity of the outbreak is currently uncertain, and thus manufacturers have become increasingly concerned about the extent of the disruption of the pandemic. The production industries have negatively impacted the business prospects amid the crisis, which has also cast a pull over the country’s economy.
The food and beverage and retail trade industry’s activities have deteriorated. This has, in turn, led to a reduction in production.
The production employees have not been rendering their services due to the movement restrictions that have been put into place to lower the rate of the covid-19 spread. Thus, labour at these industries is a major constrain to the appropriate level of production.
Though the pandemic has negatively impacted most production industries, the manufacturing of biomedical products has increased by 6.4%. Medical technology production has increased by 9.1% while that of pharmaceuticals has risen by 5.3%. The rise in production is attributed to the higher demand of the producers to fight against the diseases ( Lammersen, 2020)
China’s coronavirus outbreak has also contributed to Singapore’s production, both directly and indirectly. Singapore is the third-largest importer of various Chinese products across Southeast Asia and thus has been less affected by the disruption of the Chinese supply chain. Based on data published by DBS bank, approximately 5% of the total imports are products that are partially finished in comparison to 19% of the regional average (Gill, 2020). In February, the manufacturing sector in Singapore hit its lowest point in the period of four years based on the Purchasing Managers’ Index (PMI) measurement. Thus many of the production companies that rely on raw material from China had to go for alternative sources, which are probably more expensive. Having many production companies relying on china labour, the travel restrictions imposed in the country at the beginning of this year had a negative impact on the operations of the production industry in Singapore.
Data from late March, this year, indicated that Singapore’s economy has shrunk by approximately 2% in the first quarter of the year (Lammersen, 2020). Analysts have predicted that the full-year GDP fall, and thus there will be likely to be a recession. Nevertheless, The Ministry for Trade and Industry (MTI) has pointed out that, despite the challenges that have been presented by the pandemic, Singapore’s and global added measures will be gradually eased if the community transmissions are reduced (Lammersen, 2020). It is confident that when the employers and the government work closely together, the production industries will likely easily adapt to the situation and become stronger just like it has achieved in the previous crisis.
Ministry of Manpower (MOM) is Singapore’s government agency that is responsible for all labour matters. From the early stages of the pandemic outbreak, the agency has taken a different proactive and realistic approach to the prevailing issues in connection to labour. According to MOM, there has been an increased number of retrenchment employees since January due to the retrenchment notifications filed in the end march (Phua, 2020). These numbers have been rising at an alarming rate.
As the Singaporean government measures to curb coronavirus is becoming more severe, most of the country’s employers have faced a severe reduction in their revenue. They thus have had to take different measures to survive during the pandemic. One of the latest measures announced by the government included the closure of non-essential services as one of the circuit breaker measures (Syed, 2020). The decision led to the closure of most workplaces and the retail outlets apart from those offering essential services and goods to the population’s daily living needs. The measures inclusive of others have negatively impacted the labour market industry.
The retrenchment of employees is on the rise despite the government measures that seek to protect jobs such as the wage subsidy of between 25 and 75% and also the foreign worker rebates. According to Chua Hak Bin and Lee Ju Ye, who are Maybank economists, there will be likely to be a loss of about 150000 to 200000 jobs in 2020 despite the fiscal aid formulated by the government (Phua, 2020). Half of these layoffs are expected to impact foreign workers. Also, the unemployment rate rose more than a quarter in March to 2.4% from 2.3% (Syed, 2020)
The layoff is, to some extent, attributed to the job market economic fallout. However, the Covid-19 pandemic has led to cropping up of other employment issues, including the furloughs, reduction of salaries, and also rescinded offers of job opportunities. For example, back in March, Singapore Airlines announced it was going to take several cost-cutting steps, including the pay cuts for its executives and no-pay leave, which have impacted ten thousand of its workers (Phua, 2020).
The industries that have been most impacted by the workers’ retrenchments are those hardest hit by the pandemic restrictions such as social distancing and travel restrictions (Phua, 2020). Examples of these industries include food and beverage services, businesses, tourism and hospitality, and the consumer-facing retail. Additionally, there has been a sharp decline in the hiring rate as a result of a significant reduction in foreign employment.
Despite the difficulties experienced amid the covid-19 outbreak and other seasonal influences, the rate of local employment has managed to increase at a modest rate. According to the recent report published by MOM, most of the workers who still remain in employment are experiencing a reduction in the daily working hours as well as adjustments in their salaries (Gill, 2020).
The outbreak of coronavirus pandemic in Singapore has directly impacted the demand and supply of different commodities, affecting their price level. The direct impacts of shutdowns and the supply chain disruptions have negative implications for the economic growth stalls. Some of these impacts have been dramatic, especially for commodities that are related to transportation.
The core inflation of Singapore that excludes the accommodation and private road transport cost fell sharply in March to -0.1% as compared to that of 0.3% in January.
Due to the fall in the expenses of airfares and holiday expenses, services cost fell to -0.4% percent (Tan, 2020). The inflation of private transport inflation has gone down as a result of small increases in the cost of cars and petrol. The oil prices have continually dropped and will likely stay depressed for an extended period due to the global economic slowdown and the rise of the supply of oil.
The pandemic has led to the disruption of global food supplies and also labour shortages in the agriculture sector. For instance, there has been a lack of sufficient labour in planting and harvesting food resources, thus leading to the rising of most of the staple crops. The various international measures that have been implemented to contain the outbreak
have led to the disruptions of the supply chain, which has, in turn, led to the upward pressure of the imported food prices.
Aviation and tourism have been weighed down by the pandemic, which in turn has led to low prices of all the travel-related items. Additionally, the implementation of the social distancing measures and the fall in the arrival of tourists has led to low consumer demand. It thus has resulted in capping to any prices increase for prices of both discretionary services and goods (Tan, 2020). The economic uncertainty caused by the coronavirus has continually discouraged most firms from passing any form of cost increase to consumers.
Singapore’s home prices have also gone down in the first quarter of the year amid the pandemic outbreak. By the end of March, the property value decreased by 1.2% (Tan, 2020). With the limit of gatherings, the new rule of social distancing has impacted the selling of new units as many agents are unable to conduct viewing of the property. In the resale section, most of the owners have been turning away potential buyers out of fear of passing the disease to them. The property market may keep afloat as the unemployment level remains low.
Despite the different changes in the price level of commodities in the first quarter of the year, Singapore’s financial blue-chip stocks, leisure sections, aviation, and technology have been improving slightly. The improvement is attributed to improved domestic investor sentiments that have been associated with the massive unveiling of the Covid-19 stimulus by the government as well as the global developments.
Several analysts have singled out Singapore as one of the most vulnerable economies to the spread of coronavirus. This is because of its close economic link with China, where the virus was first detected. Since the first case of the infection was recorded in the country, the government has put into place different measures to curb or decrease these effects.
The government has given out four economic stimulus packages to aid the stability of its economy. These entire four stimuli total SGD 92.5 billion, which is about nineteen percent of the GDP. The substantial portion of the incentive is to boost the economy. The economy growth is further reinforced as more than half of the stimulus is by SGD 52 billion from the past reserves (YenNee, 2020).
Along with the other three stimulus packages, the recent stimulus will spend about S$70.4 billion, aiming to help both businesses and households manage the virus’s economic effects. The latest stimulus has other measures that include enhanced wage support for the business that may have difficulties resuming their operations after the partial lockdown, waivers and rebated in the levy of foreign employees for particular companies, small and medium-sized businesses rental waivers and relief and the expansion of employment opportunities in both the private and public sector (YenNee, 2020).
The government has also introduced several measures to ease the impact of the virus on employers and their employers. For instance, it has launched the “Support Grant” that aims to support workers who lost their jobs as a result of the pandemic and give financial support to people seeking new job opportunities. The government has also introduced the Jobs Support Scheme in its budget in support of employees (Keen and Bousfield, 2020). There has been an additional support scheme for the self-employed and the lower-income workers. These measures have helped businesses to retain their workers as opposed to letting them go during this challenging period. The cash pay-outs to the Singaporean aged above 21 have been awarded to help them survive during the pandemic.
In early April, the government allowed a weaker currency. The step was taken to facilitate exports. The government announced that it spent 11% of its GDP to limit the economic harm of coronavirus. Singapore is an open economy that is globally integrated, and thus it is deeply impacted by global shocks, hence the need to embrace some of these economic measures.
Different measures by the Singapore government, including lockdowns, aim to contain the virus that has globally hit the economy. The government has unveiled various steps that are thought to reverse the situation. The spread or the status of the pandemic being uncertain, the government needs to keep evaluating the spread dynamics in order to formulate the applicable mitigation measures.