Is a Tourism Subsidy the Best Response to the Global Financial Crisis? A Short-run CGE Simulation for Singapore

Abstract

The Global Financial Crisis in 2008 is believed to have had tremendous negative effects on tourism. To gauge this impact, this study employs recent Singaporean tourism survey data, the updated Singaporean input–output tables, and a computable general equilibrium model to analyse Singaporean tourism and the economy. The simulation results suggest that, the core tourism sectors such as accommodation and drink & tobacco are severely affected while other tourism sectors are also significantly affected. It is also shown that, contrary to previous research, the goods and services tax deduction policy is more effective than a tourism subsidy policy. However, if a subsidy policy is to be used by the Singapore government, the tourism-focused subsidy policy is much more effective than the economy-wide industrial subsidy in terms of both tourism and the whole economy.

Keywords:

• CGE modelling
• financial crisis
• tourism policy
• Singaporean economy

Notes

1 RAS method is a repeated procedure to update a matrix to new column and row totals (e.g. total output by industry or by commodity) while preserving the ratio between numbers in the matrix. To satisfy the new column total, it scales up (or down) the matrix by the ratios of the new column totals to the old column totals. Then it uses the ratios of row totals to scale up (or down) the matrix so that it complies with the new row totals. Repeating this procedure for numerous times (it is normally done by a computer), we can have a new matrix satisfying both the new column totals and the new row totals. For more details, see Parikh (1979).