Support for businesses and households are slated to feature prominently in Singapore’s first Budget for 2021 as the economy continues to pull through the havoc wreaked by the Covid-19 crisis.
Selena Ling, who heads the treasury research and strategy department of OCBC Bank expects “continued but recalibrated support for the hardest-hit industries including aviation and hospitality-related [sectors]”.
However, she says less support may be given out to sectors such as manufacturing which have been seeing a gradual recovery.
Liang Eng Hwa, chairman of the Government Parliamentary Committee for Finance, Trade and Industry shares similar sentiments.
"I expect this Budget to be a lot more targeted and differentiated than before, so we really channel and allocate funds to those businesses that need help, grow the economy and create jobs,” he said at a pre-Budget roundtable in January.
As for medium-term policies, Ling is banking on the promotion of digitalisation and e-commerce, adopting of 5G technology, internationalisation and sustainability.
A key priority will be to help employees and businesses to adapt, innovate and grow, according to Deputy Prime Minister and Finance Minister Heng Swee Keat.
He added the government will also continue to render support for workers and businesses that have been hit hard by the pandemic.
SEE: A budget for recovery and beyond
Dubbed ‘Emerging Stronger Together’, Budget 2021 will be delivered by Heng when Parliament sits on Feb 16.
“To emerge stronger, we must find new ways to work together, innovate, and transform our economy. We must strengthen our social compact and support one another, especially those with greater needs,” said Heng on the meaning behind the name of the Budget.
The upcoming Budget follows the close to $100 million disbursed across five packages in 2020.
Yu Liuqing, country analyst at the Economist Intelligence Unit notes that the suite of measures disbursed, were “among the biggest support packages in Asia in terms of the proportion of the GDP”.
Collectively, these measures helped prevent Singapore’s economy from slipping more than the 5.4% contraction that had been logged.
However, they came at a cost: a draw of up to $52 billion from the republic’s reserves.
While there is no doubt that the current expansionary path of lifting Singapore out of its worst ever recession will continue, analysts said there will be considerable prudence as the government will avoid tapping on its reserves.
This is as the government revenue as of November 2020 was down 25% y-o-y.
Irvin Seah, senior economist at DBS Bank adds that the government’s prudence will also come in that this is the first Budget for its term.
“Singapore's fiscal rule is based on the principle that a government must have balanced budget over its term of office (5 years), meaning that any deficits in one year must be balanced by surpluses in other years. Hence, the government tends to be more conservative in their fiscal planning at the start of a new term,” he mulls.
Seah is expecting an expansionary but calibrated Budget where the overall deficit comes in at around $10 to 12 billion or 2.1% to 2.5% of nominal GDP.
This is the same magnitude as the Unity Budget – announced on Feb 18 2020 – and is premised on the expectation that the fiscal outcome in the coming fiscal years will be enough to make up for the shortfall in this fiscal year, elaborates Seah.
OCBC’s Ling on the other hand is expecting a “more normalised budget” this year.
“2021 will mark a transition year from a health pandemic and recession to a vaccine-aided, albeit uneven, recovery trajectory. A such, the budget priorities and fiscal focus will also migrate from emergency economic firefighting measures to a more normalised budget focusing on more medium term and sustainable fiscal priorities,” she explains.
