Can tourism development and economic growth mutually reinforce in small countries? Evidence from Singapore

This study investigates the causal relationships between international tourism development and the economic growth of a global city–state – Singapore – drilling into the temporal details of the tourism-economy nexus in small countries. Many studies have examined whether the tourism-led growth hypothesis or the economy driven-tourism growth hypothesis holds in large developed and emerging countries. Still, relatively few studies examine small countries’ tourism-economy nexus, and the temporal details of the nexus have not been adequately examined. We examine the tourism-economy nexus in Singapore using quarterly data from 1991Q1 to 2020Q4 and the Autoregressive Distributed Lag (ARDL) Model, with the long- and short-run dynamics and the feedback loop of the nexus considered. Our statistical findings show that international tourism development leads economic growth by two quarters in Singapore. Also, there are both ‘consistent’ and ‘contemporaneous’ positive feedback loops between tourism development and economic growth, but those loops cannot last for more than a quarter. From the economic perspective, our study reveals that improving tourism activities may accelerate the post-Covid economic recovery of some small countries that rely on tourism. Yet, continuous input is required to sustain the tourism-economy synergy.