Singapore has rolled out an additional $8 billion in support on August 17 to cushion the fallout from the Covid-19 pandemic which has crumbled industries and left business gasping for liquidity.
Economists and businesses have taken well to the goodies doled out, saying they are “in line with expectations of saving industries and jobs”.
The extension of the Jobs Support Scheme (JSS), in particular, was much appreciated. The blanket wage subsidy currently covers up to $3,450 of some 1.9 million employees till August 2020, and will be extended to end in March 2021.
See: Singapore doles out another $8 bil, brings total support in fight against Covid-19 to $100.9 bil: DPM Heng
“Seven more months is quite generous and will help tide distressed companies during these challenging times,” observes Selena Ling, who heads the treasury and strategy department of OCBC Bank. “Hopefully by March 2021, there may be greater clarity that things are turning around”.
Unlike in the previous Budgets, the extended JSS scheme will be tapered off and adjusted based on the projected recovery different sectors. This comes as its heavy draw on Singapore’s reserves means it cannot be “sustained at current levels,” Heng cautioned.
The hardest hit sectors of aerospace, aviation and tourism will receive support for 50% of wage levels for the full seven-month duration. The build environment sector, meanwhile, will receive a 50% wage subsidy till October and then continue with a 30% subsidy till March 2021.
The less affected sectors of arts and entertainment, food services, land transport, marine and offshore and retail will receive a 30% wage subsidy throughout the seven-month extended JSS.
Most of the remaining sectors will receive support for 10% of wages in this time frame.
To Ling, such a tapering off is rather restrained and “appears to be one that errs on the side of caution”.
“I had thought they would go to half of the current level for the more impacted industries and possibly to 0% for those industries that are doing better and don’t need it,” she explains.
Offering a different perspective, CIMB Private Banking’s senior economist Song Seng Wun says the calibrated approach ensures that every business – even those in the third tier – gets help.
“The tiered approach is practical as not all businesses can get back on their feet to the same degree. From an aggregate standpoint, it is about saving as many jobs as possible,” stresses Song.
Agreeing, Samir Bedi who leads EY’s Asean workforce advisory says “one of the reasons this is important is that by saving these jobs, we can retain core capabilities and skills in those hard-hit sectors, so when businesses start recovering, we are able to retain our workers to be able to scale our efforts”.
Both Song and Bedi believe that support for even 10% of wages, will go a long way, such as in in paying for the employee’s Central Provident Fund contribution.
“It also creates an impetus for job creation and opportunities for shifting the workforce to those sectors,” notes Bedi.
Collectively, these benefits will reduce the risk of a spike in retrenchments, stress Maybank Kim Eng (MKE) economists Chua Hak Bin and Lee Ju Ye. The duo expect job losses to hit between 180,000 and 220,000 this year, with a slowdown in retrenchments in 2H20 from the 148,000 for the first six months of the year.
However, they caution that the unemployment rate may climb to “slightly above 4% by year-end” and “a higher proportion of job losses in 2H2020 [being] borne by locals”.
Singapore’s seasonally-adjusted unemployment rate had edged up to 2.9% in June, worse than the 2.4% it was at in March.
Unemployment among both residents and citizens rose – with the jobless rate for residents inching to 3.9% from 3.3% in March. Meanwhile, citizen unemployment rate came in at 4.0% from the 3.5% it was at in March, according to preliminary estimates released by the Manpower Ministry on July 29.
See: Total employment sinks deeper in June, following circuit breaker measures
“The JSS has likely helped to head off the worst of the local retrenchments that could have taken place during the Circuit Breaker, but it’s still an evolving story. If demand conditions don’t pick up soon, some firms may still go under and the recalibrated JSS will only buy a bit more time,” OCBC’s Ling chimes.
CIMB’s Song too believes the JSS prevented a sharper upturn in Singapore’s unemployment figures in June. Looking ahead, he says the figures will continue to rise – despite the extended JSS – as vulnerable industries such as aerospace face significant headwinds.
He adds that other sectors such as arts and entertainment may also suffer – in spite of the re-opening of their operations – as consumer’s tighten their purse strings in this bleak economy.
