SINGAPORE (Apr 24): It has been over two weeks since Singapore’s “circuit breaker” measures restricting operations of non-essential services kicked in. And while it has reduced the transmission of Covid-19 in the community from a daily average of 39 cases to 29, experts say there is still room for improvement. “We have certainly seen a drop in numbers, but I must say I am disappointed,” says Dr Leong Hoe Nam, an infectious disease specialist at Mount Elizabeth Novena Hospital.
“I expected the numbers to continue to fall, but it seems to have stagnated at around 25-30 cases a day. I would want the numbers to fall at this point to less than 10-15 and less than five towards May 4, to tell me certainly that the circuit breaker efforts were very effective,” he adds.
Given the long runway towards stemming transmissions within the local population, Prime Minister Lee Hsien Loong has announced a four-week extension to the circuit breaker which means it will now end on June 1, instead of the previously announced May 4. Additional tightening measures such as the closure of less critical services like F&B and retail have also been imposed, so that the percentage of the workforce still commuting to work reduces to 15%, from the current 20%, says National Development Minister Lawrence Wong, who is also Co-Chair of the Multi-Ministry Taskforce on Covid-19.
To cope with the extension, the government is injecting another $3.8 billion in relief measures to help Singaporeans and local businesses tide through. Unveiled by Deputy Prime Minister and Finance Minister Heng Swee Keat on April 21, the additional measures bring the city-state’s total coronavirus relief measures to $63.7 billion, or some 13% of its gross domestic product (GDP).
This $3.8 billion relief package comes hot on the heels of the April 6 Solidarity Budget, which in turn came after the Resilience Budget unveiled on March 26 and the Unity Budget announced on Feb 18.
CIMB economist Song Seng Wun says with the extension, it is inevitable that additional reliefs be extended. He describes this series of rolling measures as Singapore’s way of “rolling with the punches”.
Saving jobs
As before, a key focus of the additional relief is to ensure Singaporeans stay employed, said Heng. Notably, the government is extending its blanket wage subsidy of up to $3,450 for all Singaporean workers, to May. This Jobs Support Scheme (JSS) subsidy, which is pegged at 75% of wages up to $4,600, was previously only available to companies in sectors that were hit hard by the health crisis, such as aviation, tourism and hospitality. Those in the other sectors could only enjoy a 25% subsidy.
The move is slated to benefit all of Singapore’s 1.9 million local workers, except for those who have been retrenched or put on mandatory no-pay leave. For most companies outside the aviation and tourism sectors, the wage offset will revert to 25% from June till the end of the year.
The JSS will, for the first time, be extended to cover employees who are shareholders and directors. This will apply to companies registered on or before April 20 and for shareholders-directors with a maximum income of $100,000 in 2019. This is expected to benefit about 50,000 such shareholders-directors.
Aside from this, Heng also extended help for firms employing foreign workers on Work Permits and S-Passes through the waiver of the foreign worker levy due in May. Employers will also receive an additional foreign worker levy rebate of $750 for each Work Permit or S-Pass holder in May. This is on top of the $750 given out in April.
Economic pain
Analysts unanimously agree that the additional support is necessary. However, they argue the sufficiency of the support available for this unprecedented crisis that is panning out to be twice as bad as the 2008/2009 Global Financial Crisis and far worse than the 1929 Great Depression.
Touching on the extended and expanded JSS, Ho Meng Kit, CEO of the Singapore Business Federation (SBF), says it offers solace for cash-strapped companies pondering over how to manage surmounting costs in the extended circuit breaker period. However, he cautions it may still not provide enough relief. “The government’s financial support will not be sufficient to [cover] revenue lost by companies [but] we hope they are enough for companies to tide over this period, without having to lay off their staff.”
Estimating the additional workplace closures to bring 35% to 40% of the republic’s economy into hibernation, Maybank Kim Eng economist Chua Hak Bin agrees that some firms will still hit hard despite the support. “Extending the circuit breaker for another month and expanding the coverage could cost the economy another $10 billion or about 2% of the GDP,” Chua points out. “The longer the short circuit measures are in place, the greater the likelihood of more permanent damage to the economy.”
Similarly, United Overseas Bank (UOB) economist Barnabas Gan is looking at further downside risks to the economy. He predicts the construction sector will be the worst hit, contracting 15% in 2Q2020 amid lost revenue and delayed completion of projects in this time. The services sector is likewise likely to suffer a –4.5% drag in 2Q2020 from reduced retail spending and patronage of hotels, restaurants and other business services.
Overall, Gan is looking at Singapore’s economy to contract contracting 4% this year — a deterioration from his –2.5% forecast at the start of the circuit breaker.
Oversea-Chinese Banking Corporation’s (OCBC) head of treasury research and strategy Selena Ling, similarly, has slashed her full-year growth forecast to between –6% and –10%, from –3% earlier.
For the current 2Q2020, Ling expects the economy to shrink by 20%. “Given that exiting the circuit breaker period will involve incremental opening up, the expected recovery in 2H, especially for 3Q, may be fairly muted,” she says. This is because the combined effects of a weak labour market and gradual lifting of containment measures will give households a tendency to continue to save than to spend, she explains.
Drawing reference to the re-emergence of infections in Japan’s Hokkaido province after the gradual lifting of the lockdown there, Ling says Singapore, too, could encounter similar problems post June 1. Such a phenomenon may require the government to reassert further tightening measures, she adds.
In view of the bleak outlook, the analysts say more support may well be doled out, especially to sectors feeling the weight of the pandemic. One possible measure is additional handouts to households, which the $3.8 billion does not offer, says Chua.
Despite the opportunity costs of business operations, job security and mental health posed by the extended circuit breaker, the government stresses it remains necessary to stem transmission. People and businesses have to brace themselves for a slowdown – while taking assurance from what Heng said: “We cannot be certain of when the crisis will end. But what is certain is we are here for you, to support you.”
