Minister for Finance Lawrence Wong announced, on July 5, that small- and medium-sized enterprises (SMEs) will be receiving an additional $1.2 billion to help tide them over the Covid-19 period.
The additional amount, which is meant to tide SMEs through the Phase Two (Heightened Alert) period from May to June, is believed to be “appropriate,” says Wong.
The amount will also not be drawn from past reserves.
Of the $1.2 billion, $0.6 billion will come from the capitalisation development expenditure under the Significant Infrastructure Government Loan Act (SINGA).
The Act was proposed on April 5 to allow the government to pay for major national infrastructure projects through borrowing. It will allow the government to borrow up to $90 billion to pay for infrastructure that costs at least $4 billion and will last for at least 50 years.
There are two projects that currently meet the criteria, says Wong.
They are: the Deep Tunnel Sewerage System, which is an underground conveyance system to treat used water, and the North-South Corridor, an expressway that will link the northern part of the island to its city centre.
With SINGA, the government will borrow for these projects and capitalise their development expenditure from 4Q2021.
The amount originally budgeted will now be reallocated to fund the support package, says Wong.
However, Wong noted that the shift is a “one-off adjustment” as SINGA was passed after the FY2021 began.
“The amounts capitalised under SINGA will be incorporated under future budget estimates… We won’t have such reallocation space in future,” Wong emphasised.
The remaining $0.6 billion will be reallocated from underused expenditure due to delays from projects arising from Covid-19.
Wong was careful to note that the projects are not being cancelled. The government will still have to catch up on its development schedules.
The expense will still be used in future, but for now, there is “some space” for reallocation, he says.
Extension of schemes
On top of that, Wong announced that the government will be extending the Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme – Trade Loan for another six months.
Both schemes will now be extended from Oct 1 to March 31, 2022.
The parameters for both schemes will remain unchanged. This includes the government risk-share of 70%, says Wong.
The Monetary Authority of Singapore (MAS) will also extend the MAS Singapore Dollar Facility for Enterprise Singapore Loans, he adds.
“During times of crisis, we recognise that lower-income households and SMEs face bigger challenges. We have designed interventions to benefit them the most,” says Wong.
“I encourage businesses to make use of this extension and other available schemes to ready themselves for the new normal,” he adds.
In his speech, Wong noted that the government extended $22 billion worth of loans to 25,000 enterprises through Enterprise Singapore’s financing schemes since 2020, where 99% of recipients were SMEs.
“Such access to credit remains critical,” he says.
Drawing on past reserves
Drawing of past reserves is only done under “exceptional circumstances” like in 2020, when the Singapore economy contracted by 5.8%.
“The situation is not the same this time… The economy is recovering [and] the employment situation is steadily recovering,” Wong adds, noting that the country’s Covid-19 testing capabilities have also improved.
On the reallocation of funds, Wong said that the government “will not hesitate to use the full measure of fiscal fire power to protect the lives and livelihoods of Singaporeans”.
“But we need to be careful to ensure the sustainability of our future.”
On this, Wong says that the government is expected to draw up to $53.7 billion from the country’s reserves – an amount “we are not likely to put back”.
The expenditure in 2020 was the highest ever in the history of the republic, which led to the largest budget deficit in Singapore’s history.
“Now that things are better, we should refrain from drawing further,” says Wong.
Instead, the government will fund measures with resources from Budget 2021, which is “the responsible way to manage our finances”.
Singapore’s GDP growth
The uncertainty of Singapore’s economy may be larger than usual, but Wong says the government continues to expect GDP growth of 4% to 6% in 2021.
Recovery, however, will be uneven across sectors.
Outward-bound sectors are projected to benefit from external demand. The construction, marine and offshore sectors are “not short of projects” but currently face severe manpower shortage.
As borders are reopened, Wong expects the outlook for these industries to improve.
Inward-facing sectors such as retail and food and beverage (F&B) look set to recover amid the loosening of restrictions.
The government, on July 5, announced that the dining-in group size limit will increase to five from July 12.
Recovery will be more gradual for hard-hit sectors like aviation and tourism-related ones as it’ll take a long time for international travel to recover to pre-Covid-19 levels, notes Wong.
See also: Southeast Asia not expected to return to pre-Covid-19 growth levels in several years: survey
He adds that the government will do its part to reskill the affected workers and transition them to other industries. The sectors will also be positioned for recovery once the restrictions are lifted.
To-date, Singapore’s budget position for the FY2021 remains expansionary with an overall budget deficit of $11 billion or 2.2% of Singapore’s GDP, similar to what was announced during Budget 2021.
On sustainability, Wong adds that Singapore is also looking to create new investments and jobs for a green economy, strengthening its position in the region as a centre for green finance.
Photo: Bloomberg
