THE EDGE SINGAPORE - Singapore was told it could tide through the Covid-19 health-turned-economic crisis with Unity, Resilience, Solidarity and Fortitude — values after which the city-state’s unprecedented four Budgets for the year were christened. Totalling $92.9 billion or some 20% of GDP, the landmark package, said Deputy Prime Minister Heng Swee Keat, was “a necessary response to an unprecedented crisis”.
This massive stimulus had worked, to a certain extent. According to a joint study by the Ministry of Trade and Industry and Ministry of Finance, the four Budgets have collectively prevented Singapore’s real GDP from losing some 5.5% in 2020, alleviating what is already the worst quarterly contraction on record for 2Q2020.
On Aug 17, the government announced another $8 billion package to battle the bug, as cracks in Singapore’s economy are getting more apparent. For one, over 300,000 workers have suffered lower income of more than 10% since the start of the pandemic. Those with lower income and in the age bracket of 35 to 44 have been harder hit than the average, DBS Bank revealed on Aug 18. For this demographic, a third of the workers suffered wage cuts of more than half, and a quarter saw incomes fall between 31% and 50%. DBS, which has the largest retail deposit base, obtained these findings by parsing anonymised account data between March and May of some 1.2 million customers whose salaries are credited into the bank’s accounts.
Meanwhile, data from job portals paints a picture of how bleak the job market is. Career search and networking platform LinkedIn notes that the average number of applications for openings posted on its site doubled from 40 at the start of the year to 80 in July. Numbers began to rise in April when the “circuit breaker” measures restricting the operations of non-essential services brought on a wave of retrenchments.
While government initiatives such as SGUnited Jobs are being pushed out aggressively, the number of job positions has dropped. According to LinkedIn, the biggest y-o-y declines in job postings for the months of May to July came from consumer goods (–45%), media & communications (–31%) and corporate services (–22%) (see chart). However, bright spots were seen in sectors that have been in high demand since the pandemic broke out, such as IT and healthcare.
This gloomy prognosis spells bad news for a job market that is already under stress. Advance estimates from the Ministry of Manpower (MOM) showed that the unemployment rate climbed from 2.4% in March to 2.9% in June. MOM’s job situation report released on Aug 11 cautions that the “softness in the labour market is likely to persist, with weakness in hiring and pressure on companies to retrench”.
The big worry now is the surge in job losses, which hit 121,800 in June 2020, more than four times the 25,600 registered in March, according to preliminary estimates from MOM. However, the June numbers should be seen in the context of employers not stumping up the full wage bill.
As part of the $92.9 billion support package, the government is subsidising up to $3,450 per month for each of the 1.9 million working Singaporeans. A feature article in the Economic Survey of Singapore for 2Q2020 released on Aug 11 notes that this Jobs Support Scheme (JSS) alone — which has disbursed $16 billion — will help reduce Singapore’s unemployment level by 0.9 percentage point. Collectively, the four Budgets will cushion the rate by 1.7 percentage points.
Evolving story
The highlight of the Aug 17 package was the extension of the JSS. While some business owners are surely hoping for more, economists such as Selena Ling of OCBC are cheered that the JSS has been extended from August this year to March next year. “Seven more months is quite generous and this will help tide dis- tressed companies during these challenging times,” observes Ling, who heads the bank’s treasury and strategy department. “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 in different sectors. This comes as its heavy draw on Singapore’s reserves means it cannot be “sustained at current levels”, Heng cautioned.
The most badly hit sectors — aviation, airlines and tourism — will receive a 50% subsidy for seven more months under the extended JSS. The less affected sectors of arts and entertainment, food services, land transport, marine & offshore and retail will get a 30% subsidy. Most of the remaining sectors will receive support for 10% of wages in this time-frame, while better-performing sectors such as biomedical sciences, financial services and ICT will have 10% support for wages paid till December.
“I urge all businesses to make full use of this additional support to retain and upskill your workers, and to transform your operations for the post-Covid-19 world. This will enable you to spring back faster when the recovery comes,” said Heng.
To Ling, such a tapering off is rather restrained and “appears to be one that errs on the side of caution”. She says: “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.”
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 least affected 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 will be able ... to scale our efforts”.
Both Song and Bedi believe even a 10% support will go a long way — it is equivalent to more than half of the employers’ share of CPF contributions. “It also creates an impetus for job creation and opportunities for shifting the workforce to those sectors,” adds Bedi.
Growing sectors such as biomedical sciences, financial services, ICT and healthcare can tap such opportunities through the $1 billion Jobs Growth Initiative, which looks to aid firms in increasing their headcount. Subject to a cap, the government will co-pay up to 25% of salaries of new local hires for a year or up to 50% for those aged 40 and above.
Other measures include extending the Covid- 19 Support Grant for Singaporeans who are unemployed or have suffered significant income loss, till December. The government is also studying how to continue supporting employees and self-employed persons. For example, more workers will be eligible for the upcoming $3,000 Workfare Special Payment.
Collectively, these benefits are meant to temper a spike in retrenchments, according to Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye. They expect job losses to hit between 180,000 and 220,000 this year, with a slowdown in retrenchments in 2H2020 from 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 that “a higher proportion of job losses in 2H2020 [will be] borne by locals”.
OCBC’s Ling says: “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.”
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 and hospitality face significant headwinds. On Aug 19, the hotel arm of property giant City Developments announced it will lay off 159 locals and 42 non-locals. Song adds that other sectors such as arts and entertainment may also suffer — in spite of the reopening of their operations — as consumers tighten their purse-strings in this bleak economy.
Developing frontiers
The government is giving additional targeted help to the most badly-hit sectors. For example, there is the $187 million Enhanced Aviation Support Package which will now run till March 2021, as well as $320 million in SingaporeRediscovers vouchers to encourage domestic tourism while waiting for borders to reopen. Additional help is on tap for arts and culture and sports. Some of the firms in these sectors have yet to resume operations and the support will be to “help them transition to other activities or ease their exit”, says Heng.
In the longer term, Heng believes Singapore must position itself to seize opportunities beyond a Covid-19 world. To facilitate this, up to $150 million has been set aside to enhance the Startup SG Founder programme to help turn ideas in smart commerce and supply chain digitalisation into commercially viable entities.
The latest slew of goodies totalling $8 billion will be funded through a reallocation of monies from development spending that has been delayed. What this means is there will be no further draw on past reserves beyond the $52 billion announced during the Fortitude Budget in May 26.
In fact, the overall budget balance for FY2020 is projected to be a deficit of $74.2 billion, a $0.1 billion improvement from the $74.3 billion deficit predicted during the Fortitude Budget. This follows a dip of 7.4% or $5.1 billion in operating revenue to $63.7 billion on reduced economic activity. Total expenditure similarly is projected to be down by 7.6% or $8.4 billion, to $102.1 billion, thanks to reduced spending on construction works and military-related operations.
Looking ahead, market watchers expect the slew of fiscal measures to do the heavy lifting in reviving Singapore’s economy from the Covid-19 bug. Heng, paraphrasing the popular slogan of the Liverpool football club, put it this way: “It is a difficult journey ahead, but you will not walk alone.”
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