The Economic Effects of a Negative Shock on Tourism Demand in Singapore: A CGE Modeling Approach

Abstract

Negative mega events such as the 911 terrorist attacks and the world economic crisis in 2008 have tremendous negative effects on the tourism sector in particular and on the economy in general. This study employs recent Singaporean tourism survey data, the updated Singaporean input-output table, and the Computable General Equilibrium (CGE) model to gauge the effects of a decrease in tourism demand on the Singaporean economy. The CGE simulation results demonstrate that a decrease in tourism demand tends to have negative effects on Singapore's economy. At the macro level, although almost all variables are negatively affected, exports benefits greatly. At the industry level, a negative tourism shock impacts severely on the tourism-related sectors, only slightly on sectors weakly linked to tourism, but the tourism-competing sectors expand. The results also suggest that low skilled workers are harshly affected, but some occupational groups benefit at the expense of others.