A budget for recovery and beyond
By Jeffrey Tan
/ The Edge Singapore |
SINGAPORE (EDGEPROP) - A few days before the tabling of Budget 2020 last year, a leaked audio recording of Chan Chun Sing’s dialogue at the Singapore Chinese Chamber of Commerce and Industry (SCCCI) was circulating on social media.
In the 25-minute recording, the Minister of Trade and Industry can be heard urging businessmen to position their businesses for a recovery from the Covid-19 impact – and not just focus on alleviating the immediate impact.
Read more: Retailers adapt to survive Covid-19
“Because while we’re dealing with the current [pandemic], we must make sure that we think two steps down the road,” Chan said in delightfully colourful Singlish.
“Don’t just - bu yao zhi shi kan yan qian (don't just look at the present). We must distinguish ourselves as Singapore to think of the beyond here and now,” he added in the closed-door session.
Throughout the past year, even when the whole country was busy dealing with the crisis, there was a constant reminder – not always articulated in the same way as Chan - to keep an eye for what’s round the corner.
On Feb 16, Deputy Prime Minister and Finance Minister Heng Swee Keat unveiled Budget 2021, which he dubbed as the Emerging Stronger Together Budget. The tabling of the budget comes after the city-state’s GDP contracted a record 5.4% last year during the height of the pandemic.
According to the government’s estimates, the economy could have fared for worse – contracting at least 12.4% -- if not for the fiscal and monetary policy measures, including, of course, the near $100 billion package of support.
Thus far, Singapore has largely contained the spread of Covid-19 and is gradually reopening its economy in phases. Yet if it is not careful in continuing to do so, the pandemic could send the city-state back into another circuit breaker. Singapore’s open economy is also vulnerable to volatile changes in trade because of geopolitical tensions.
The heightened sense of vulnerability and international distrust during the pandemic has led to increasing protectionism over supply chains, resources, data, and technology. “Vaccine nationalism” has become a newly-coined ill added to the mix.
Fortunately, Singapore is aware and preparing to face the challenges ahead. In his budget speech in Parliament, Heng says the country has weathered crisis after crisis, and emerged stronger.
“I am confident that we, as Singaporeans, can once again summon our resolve to tackle the challenges, and emerge stronger from this unprecedented crisis,” Heng says with a sense of quiet confidence, who was in the mood to quip a joke or two in his speech.
Under Budget 2021, Singapore will have another $11 billion in relief measures to help Singaporeans and local businesses to tide through the pandemic. A large chunk of it will be channelled towards public health and safe reopening measures.
A portion of it will be used to extend the Jobs Support Scheme (JSS) – which provides a blanket wage subsidy for Singaporean employees – for six months till September. Another portion of it will be utilised to provide more targeted support for the worst-hit sectors, such as aviation and land transport.
More importantly, the budget is taking steps to help Singapore adapt to structural changes brought about by the pandemic. Singapore will allocate $24 billion to enable local companies and workers to emerge stronger.
This will go towards deepening Singapore’s position as a “Global-Asia” node, enhancing its status quo as a financial centre and transport hub. This will also go towards developing the skills, talents, and creativity of the local workforce.
Still yet, the budget is taking further steps to secure Singapore’s long-term future – a future where presumably Covid-19 would be by then a closed chapter.
Notably, Singapore will increase its expenditure to lower carbon footprint, as part of a “whole-of-society effort to meet a global challenge.”
Heng says $30 million will be set aside over the next five years for electric vehicle (EV)-related initiatives. He adds that petrol duty rates for premium petrol have been raised by 15 cents a litre effective Feb 16 to encourage EV adoption.
Moreover, $60 million will be set out for a new Agri-Food Cluster Transformation Fund that will ensure the country’s food resilience.
In addition, Heng says the government will take the lead by issuing green bonds on select public infrastructure projects. He notes that the government has identified up to $19 billion of public sector green projects as a start. The government also intends to issue new bonds under a proposed Significant Infrastructure Government Loan Act, or SINGA for short.
The proceeds from these bonds will be used to finance major, long-term projects, such as new MRT lines and infrastructure to protect against rising sea levels, says Heng.
Overall, Singapore’s bold initiatives will not come cheap. The total expenditure is expected to result in a budget deficit of $11.0 billion, or 2.2% of GDP this year.
Heng is aware that Singapore cannot run budget deficits continually. As an almost yearly affair, the government is getting the knife to niche corners of the economy in order to raise more revenue.
One year, it was a big hike on taxes on large motorcycles, another was to punish smokers even more with additional taxes. This time round, come 2023, overseas online shopping will be subjected to GST.
For now, though, the country is still able to tap on its vast past reserves to fund the country’s expenditure, if necessary. As high as the national expenditure may be, the long-term gain far outweighs the short-term pain. If it means that Singapore will emerge out of Covid-19 in pole position, it is a necessary commitment. The country could rebound spectacularly just like it did from previous crises.
“The most important is to position ourselves after SARS, to make sure that we recover fastest. That’s why the global financial crisis, everybody fall like a rock right?
“Then we the next year went up 14.5%,” Chan recounted in his dialogue at SCCCI.
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