The Impact of the 2008 World Financial Crisis on Tourism and the Singapore Economy and Policy Responses: A CGE Analysis

Abstract

Mega events such as the World Financial Crisis in 2008 have tremendous negative economic effects, particularly on tourism. This study employs recent Singaporean tourism survey data, the updated Singaporean input-output tables, and a Computable General Equilibrium (CGE) model to gauge the negative effects of the 2008 World Financial Crisis on Singapore and to simulate the effects of selected policy responses. The CGE simulation results demonstrate that at the macro level, although almost all variables are negatively affected, exports benefit greatly. At the industry level, a negative tourism shock impacts severely on the tourism-related sectors, impacts only slightly on sectors weakly linked to tourism, but tourism-competing sectors expand. In commodity market, prices and outputs decrease for most products but real household consumption and exports increase. In the labor market, low skilled workers are harshly affected, but some occupational groups benefit at the expense of others. The simulation results also suggest that, in response to an event like the 2008 World Financial Crisis, a slightly decrease in the GST rate is more effective than a significant increase in the tourism tax rate.