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Zika outbreak to have little impact on Singapore economy: analysts

Singapore authorities say they have identified 41 locally-transmitted cases of the Zika virus, mostly in foreign construction workers, and that more are expected. Natasha Howitt reports.

Most experts believe that the impact of the Zika outbreak on Singapore business will be minimal for now.

“I don't see any drag (of Zika) on the economy unless we quarantine ourselves indoors and tourists stop coming,” said CIMB Private Bank economist Song Seng Wun on Monday (29 August), a day after the Ministry of Health (MOH) said 41 cases of locally-transmitted Zika virus infection have been confirmed.

Millennium Hotels and Resorts, which has six hotels in Singapore, has not encountered any queries or cancellations since news of the outbreak broke, a spokesperson said, adding that “it may be too early to ascertain the impact of the Zika virus outbreak.”

But Voyage Research CEO Roger Tan saw the decline in the Straits Times Index on Monday as partly due to a knee-jerk reaction to news of the Zika local transmission.

“I think the fact that so many cases of local transmission have been found will cause some market concern,” he said.

The Straits Times Index closed 1 per cent lower as oil and gas stocks lost ground after global crude prices fell.

Some analysts point to a possible U.S. interest rate hike by the end of 2016 as being a bigger potential drag on Singapore's stock market.

On Saturday morning, US Federal Reserve Chair Janet Yellen said in a speech at the Fed’s annual monetary policy conference that economic data like employment and consumer confidence have strengthened the case for a rate hike.

Yeo Kee Yan, market strategist for DBS Group Research, believes that “heightened expectation of a US Federal rate hike has a bigger impact, because higher interest rates affect borrowing costs across the board. Businesses, especially sectors with high gearing like those in oil and gas, and property, as well as consumers would be affected.”

Meanwhile, Singapore's construction sector could feel the pinch from the Zika outbreak. A stop work order, such as the one imposed on the construction site of the Sims Urban Oasis condominium, could lead to a loss amounting to tens of thousand of dollars, estimates Singapore Contractors Association Ltd (SCAL) President Kenneth Loo.

On figuring out whether Zika is really having an impact on Singapore's economy, CIMB's Song suggests that “pokemon hunters traversing around Singapore in their numbers” could be symptomatic of an economy that’s uninfected by the outbreak. 

“If Pokemon hunters are still hunting, and tourists are still coming to Singapore for business and leisure, then the economy should not be affected by the Zika outbreak," he said.