Retail Sales and Tourism to be Weighed Down by Coronavirus Outbreak

Near-term growth prospects in the Asean region will be impacted by the coronavirus outbreak, where tourism-related sectors and manufacturing sector (through disruptions within the global supply chain) will be slower, leading to lower real GDP growth in 1Q20. We believe Philippines’ export growth in December, which rebounded sharply with an expansion of 21.4% yoy from a decline of 0.4% in November, will unlikely to be sustained in 1Q20. The sharp increase in December’s exports was also due partly to the low base effect from the previous year, led by higher exports of electronic products, other manufactured goods, cathodes and sections of cathodes of refined copper, ignition wiring set and other wiring sets used in vehicles, aircrafts and ships as well as machinery and transport equipment. Meanwhile, imports declined for the ninth consecutive month by 7.6% yoy in December compared to a fall of 8%. For the full year, Philippines’ exports growth expanded by 1.5% from 0.9% in 2018. We believe that if the coronavirus outbreak persists in the near term, where China’s economy slows down sharply, Philippines’ exports will also turn weaker as China accounted for 14.5% of its total exports. Socioeconomic Planning Secretary Ernersto M. Pernia already cautioned that Philippines should look for other export destinations in order to boost its export drive on top of diversifying its products.

Separately in Singapore, retail sales contracted for the eleventh consecutive month by 3.4% yoy in December from -4.2% in November. Excluding motor vehicles, retail sales rose slightly to 0.1% yoy in December from a decline of 0.8% in November. In 2019, retail sales fell for the second year in the row by 2.8% yoy from 0.8% in 2018, its weakest annual growth since 2013. On a year-on-year basis in December, the retail sales was dragged by the sustained double-digit decline in motor vehicles sales (-24.1%), furniture and household equipment (-8.2%), computer and telecommunications equipment industries (-6.3%), department stores (-5.6%) and optical goods and books (- 1.2%). Going forward, we believe that weakness in Singapore’s retail sales may continue to persist as consumers may avoid brick-and-mortar stores in light of the recent coronavirus.

Besides that, lower expected tourist arrivals especially from China to Singapore will also likely result in continued weak retail sales data in the coming months as tourists from China account for 19% of Singapore’s total tourist arrivals in 2019. Furthermore, Singapore’s Tourism Board has guided that there may be a decline in tourist arrivals of about 25-30% in 2020 due to the outbreak. Nevertheless, we believe that online retail sales will gradually increase as a result. It was guided by Singapore Department Statistics that out of the total retail sales value in December of about S$4.2bn, 6.8% of this was from online retail sales. Moreover, we anticipate Budget 2020, which will be announced on 18 February to provide some stimulus and measures to support tourism-related sectors and private consumption.

Source: Affin Hwang Research - 14 Feb 2020