A cloud over economic growth prospects

A cloud over economic growth prospects

SINGAPORE - Singapore's worst-ever haze is casting a pall over not only its skyline, but also the prospects for its economic growth this year.

Economic watchers are starting to total up the possible damage to the Republic's economy after Prime Minister Lee Hsien Loong last week raised the possibility that the haze might last for several weeks or more.

"The main thing to watch will be the duration of the haze. If it continues through to end-August, when the dry season is likely to end, then the cumulative impactwill be quite large," said UOB economist Francis Tan.

He estimates that if the haze lasts for most of the third quarter, that could shave off 0.3 to 0.5 percentage point from his current forecast of 3 per cent economic growth this year.

This forecast is on the high side of the Government's official tip of 1 to 3 per cent growth.

A 0.3 percentage point cut in Mr Tan's projection works out to about $1.1 billion in real gross domestic product, he said.

Using another measure, Barclays economist Joey Chew suggests any estimate of the haze's cost should start at $300 million a month, which works out to about 1 per cent of monthly GDP.

This would be the loss if tourism revenue declines 10 per cent and retailers and dining joints lose another 10 per cent in domestic sales, Ms Chew said.

"The costs escalate if the situation starts affecting construction and other parts of manufacturing," she added.

"Our initial assessment is the haze could have quite a limited impact on the economy, but the situation is fluid now and it's hard to tell."

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