Singapore announced a $1.5 billion package to shield lower-income households from surging costs of living, joining fiscal policymakers globally in blunting the pain of sustained price pressures.
The package, which includes direct payments and household utilities rebates, is targeted at providing relief to the most vulnerable groups, the Ministry of Finance said Tuesday. It also consists of assistance to local businesses by way of increased wage credit and steps to support jobs.
“There remains significant uncertainty on how prolonged or deep the challenges ahead will be,” the ministry said in a statement.
Singapore isn’t alone among Asian nations ramping up support, with regional authorities particularly focused on checking sharp gains in food prices. Malaysia and Indonesia have resorted to export bans on commodities like palm oil and chicken to keep local prices in check, while Thailand recently extended price caps for essential goods and proposed a profit-sharing arrangement with energy firms to fund fuel subsidies.
In February’s budget, Finance Minister Lawrence Wong announced the country’s third straight budget deficit as the government kept spending taps open to support the economy’s recovery from the Covid shock. Officials expect the total draw on Singapore’s reserves for pandemic aid to amount to $42.9 billion over three fiscal years.
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The package announced Tuesday will be funded through better-than-expected fiscal revenue in 2021, the ministry said, and that there will be no further draw on past reserves.
The trade-reliant business hub has been particularly vulnerable to food and energy price surges caused by Covid-induced supply bottlenecks and Russia’s war in Ukraine. The core inflation print for May, to be announced Thursday, is expected to surge further from a decade-high 3.3% in April, according to a Bloomberg survey.
The city-state’s central bank expects core inflation to surge further over coming months, with its latest forecast predicting core figures to average between 2.5% to 3.5% this year. All-items price rises are seen between 4.5% to 5.5%.
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The Monetary Authority of Singapore, which seeks to dampen imported inflation through strengthening the country’s currency settings against a basket of its top trading partners, has opted to tighten monetary policy settings three times in the last eight months, including a surprise move in January.
The measures announced Tuesday stopped short of direct market intervention. The finance ministry said in its statement that they’re designed to “not distort price signals, as these are needed to guide our economic restructuring and transformation.”
Some of the key support measures include:
Eligible locals will get a one-off Goods and Services Tax voucher of up to $300
All Singaporean households will receive a $100 rebate on utilities
Local companies to get higher subsidies for the Progressive Wage Credit Scheme and an Energy Efficiency Grant for small- and medium-sized enterprises
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