SINGAPORE (Feb 21): Businesses, workers, families and front-line agencies are set to get a helping hand from Budget 2020 in dealing with the economic uncertainty of the ongoing novel coronavirus outbreak through a $6.4 billion package.
This is in a bid to stabilise Singapore’s economy and cushion the implications of the outbreak which has already affected tourist arrivals and disrupted global supply chains since it broke out last month, Deputy Prime Minister and Finance Minister Heng Swee Keat revealed in his Budget 2020 speech on Tuesday.
Foremost in his concerns is jobs, acknowledges Heng who unveiled a $4-billion Stabilisation and Support Package to help workers and businesses deal with near-term economic uncertainties. Of this, $1.3 billion is set aside through a Jobs Support Scheme for some 1.9 million Singaporeans and permanent residents.
Under this, employers will receive an 8% cash grant on the gross monthly wage of each employee for three months, capped at $3,600 per worker. They can also benefit from the $1.1 billion enhanced Wage Credit Scheme which supports additional costs to enterprises, from wage increments.
Meanwhile, enterprises can expect to receive rebates of 25% of tax payable, capped at $15,000 per company. This $400 million move comes together with a slew of tax treatments such as a faster write-down of investments in plant and machinery, and renovation and refurbishment incurred for assessment in 2021. Heng also raised the enterprising financing scheme’s working capital loan component from $300,000 to $600,000 in a bid to encourage further innovation, particulaly among SMEs.
SS Teo, chairman of the Singapore Business Federation, urges companies to make use of the downtime and incentives available to train their people with relevant skills so that the restructuring and transformation process can go on.
On the other hand, Teo is calling for the government departments to make it easier for companies to tap those incentives. “The success of these measures rests on their implementation. We call on the government to simplify access to these schemes, which are a much-needed boost in these difficult times, so companies can easily leverage them,” he says.
Teo is also urging Singapore businesses to provide mutual support. “Beyond the budget measures, our companies should also help one another cope with the impact of the Covid-19 outbreak. They should help their suppliers with cash advances or simply ensure that they pay on time.”
Classical Keynesian economics
As an immediate counter to the Covid-19 outbreak, Heng has announced a package worth $800 million for front line industries and people in the tourism, aviation, retail, F&B and point-to-point transportation bearing the brunt of the fallout.
For instance, a property tax rebate of 30% will be granted for accommodation and function rooms of licensed hotels and three Meetings, Incentives, Conventions and Exhibitions (MICE) venues, namely the Suntec Singapore Convention and Exhibition Centre, Singapore Expo and the Changi Exhibition Centre.
International cruise and ferry terminals are slated to receive 15% property tax rebates while the integrated resorts will receive a 10% rebate, benefiting the likes of Genting Singapore and Marina Bay Sands.
As for the aviation sector, Heng granted a 15% property tax rebate for Changi Airport, alongside a suite of measures including rebates on aircraft landing and parking charges, assistance to ground handling agents and rental rebates for shops and cargo agents at Changi Airport. Meanwhile, the food and retail sector are slated to get a full month’s rental waiver, to cope with lower patronage.
Taxi drivers and private ride-hailing drivers will be supported by a $77 million Point-to-Point package. The move comes as taxi and private-car drivers see a reduction in the number of trips they make per day, notes Senior Minister of State for Transport Janil Puthucheary. This package is made up of $41 million in government contributions and $32 million from operators, and will benefit 400,000 drivers through $20 handouts, per day, per vehicle, for three months.
The sweetness of Budget 2020 has seen market watchers sitting up and postulating that the next election is just around the corner. “Given the magnitude of the whole budget plan and how comprehensive and deep it is suggests that the election is right there in the calendar despite this overhanging shadow of the coronavirus outbreak,” muses Irvin Seah, senior economist at DBS Bank.
However, some others such as Maybank Kim Eng economists Chua Hak Bin and Lee Ju Yu suggest that the relief package is something needed for firms to cope with the economic uncertainty – indicating that the measures may not be sweet treats. “The relief package may be sufficient to help firms cope with a short-lived one quarter contraction, but may not be enough if the virus outbreak and contraction lasts for two quarters,” the duo say.
OCBC economist Howie Lee agrees that it is “tempting” to call this an “election-friendly” budget, but “more than meets the eye”. “In an environment beset by low interest rates and trade protectionism, there was an urgency for the Singapore Government to dole out fiscal stimulus to shore up growth. The stimulus was duly delivered,” he adds.
“This is classical Keynesian economics at work and the economic support packages would have been welcomed under such a challenging environment – election year or otherwise,” says Lee.
