SINGAPORE (Apr 6): Singapore is rolling out an additional $5.1 billion in relief measures to cushion the blow of a month-long circuit breaker, which will see the suspension of all non-essential business activities from April 7.
And economists have taken well to the latest goodies doled out, which they say are “in line with expectations of saving jobs”.
Unveiled by Deputy Prime Minister and Finance Minister Heng Swee Keat on Monday, the package – officially dubbed the Solidarity Budget – brings the city-state’s total coronavirus relief measures to $59.9 billion, or some 12% of its gross domestic product (GDP).
The Solidarity Budget is the third relief package for the year and comes after the Unity Budget announced on Feb 18 and the Resilience Budget announced’ on March 26.
“The shortening time frame between the Unity to Resilience Budget and from the Resilience to Solidarity budget tells you about the the economic urgency [for more aid],” observes Selena Ling, Head of Treasury at the Oversea-Chinese Banking Corporation (OCBC).
“This is a much-needed steroid shot, where the government is using a holistic approach to reach out to firms already under stress,” she adds.
While the latest budget requires the government to dip into past reserves and run a budget deficit of $44.3 billion for FY2020 – which comes up to around 8.9% of GDP – Heng believes it is a necessary move to protect Singapore’s ailing economy.
“We must take short-term pains to avoid even sharper pain later. Let us bear these immediate pains with fortitude,” he says.
Maybank Kim Eng’s senior economist Chua Hak Bin believes the additional support is critical to firms and will help them tide this economic slowdown.
“The generous increase in payout will go a long way in helping firms keep their workers,” he says. “There will still be job losses, but the severity will be cushioned by this third package.”
However, with non-essential businesses and other activities being stood down for a month, economists still say the measures from the Solidarity Budget do little to prevent Singapore from slipping into a recession.
“The Solidarity Budget will not prevent a deepening recession, but will contain job losses,” explains Chua.
Estimating the non-essential services sector to account for 30% of the republic’s GDP, he predicts the month-long closure to cost the republic $10 billion, or 2% of GDP.
Meanwhile, he expects some 1.3 million workers could go into “cold storage” during this period.
Even so, economists concur that a further extension to the Jobs Support Scheme (JSS) would be a challenge.
“With all industries getting a 75% wage offset in the Solidarity Budget, it’s hard to see how much more [the government] can do, unless they do 100% -- but that may be anathema to policymakers due to moral hazard,” observes OCBC’s Ling.
As such, she says the government could possibly extend more cash payouts to unemployed Singaporeans if the situation deteriorates.
“As this is a rolling crisis, the bottom line is about helping companies. So, if more enhancements are needed, they will be done depending on [how the situation evolves],” CIMB economist Song Seng Wun points out.
“Nobody knows if the one month circuit breaker is sufficient. So, more supplementary Budgets may not be off the table,” chimes OCBC’s Ling.
The concern, she adds, is that the “marginal impact of the extra Budgets may suffer from law of diminishing marginal returns” – meaning that additional aid may turn out to bring less good to the economy then intended.
