A Computable General Equilibrium Analysis of Potential Policy Responses to a Negative Tourism Demand Shock in Singapore

The 2008 global financial crisis had strong negative economic effects, particularly on tourism. Determining appropriate policy responses to mitigate these negative effects is thus important. Accordingly, this study employs recent Singaporean tourism survey data, updated Singaporean input-output tables, and a Computable General Equilibrium (CGE) model to gauge the short-run negative impact of the 2008 global financial crisis on the Singaporean tourist sector and to simulate the effects of selected three policy responses. Our simulation results suggest that the GST deduction policy is more effective than an industrial subsidy policy. However, if the latter is used by government, then a tourism-focused subsidy policy is recommended since it is much more effective than the economy-wide industrial subsidy in terms of both tourism and the aggregate economy.