SINGAPORE (Feb 3): In just two more weeks, deputy prime minister and finance minister Heng Swee Keat will be announcing Budget 2020. And with a challenging economic outlook and the effects of the coronavirus outbreak in the background, Singaporeans are anticipating some relief from the upcoming budget, according to DBS Group Research.
Moreover, employment prospects in Singapore remain clouded with uncertainties. In recent months, job data has also shown mixed results.
In a Monday report, senior economist Irvin Seah says, “While employment growth has remained strong, unemployment rate for residents rose to 3.2% on a seasonally adjusted basis, the highest since 1Q17. The number of retrenchments in the same period (2,430) edged up from the previous quarter (2,320) although it remained lower than a year ago (2,860).”
“Most importantly, job vacancy to unemployed person ratio, a good indicator on the current state of the labour market, fell further to 0.83. That is, there are more unemployed persons than job vacancies in the labour market,” he adds.
But the bad news does not stop here. Seah believes that the ongoing coronavirus outbreak could negatively affect the economy and the effects may spill over to the labour market. More specifically, those in the tourism, transport, retail and F&B industries could be worst hit.
This is in comparison to the SARS epidemic in 2003, when GDP growth shrunk by 0.3% in 2Q and unemployment rate increased to 4.8% in 3Q. To counter the impact, a $230 million SARS relief package was introduced in April 2003 to support the economy and the affected industries. Likewise, the government is likely to announce similar support measures in the upcoming budget.
Beyond that, policy measures to support retrenched workers, enhance employability, and defray higher costs of living could also be in focus.
Seah believes that some of the measures could include:
- Personal income tax rebates for all taxpayers;
- Tax relief for retrenched workers ;
- Cash relief for workers affected directly by the outbreak
- More GST vouchers (Cash, U-Save rebate), and S&CC rebate;
- Extension of the Special Employment Credits (SEC);
- One-off cash bonus under Workfare Income Supplement (WIS);
- One-off SG Cash Bonus for all Singaporeans;
- CPF Medisave top-up;
- More financial support for needy families
- More childcare relief and Edusave top-up
Additionally, Singapore has been an advocate for fostering an inclusive society, Hence, policymakers are likely to give additional support for caregivers of elderly, single parents, disabled and other less privileged members of the society.
“From a structural perspective, one segment of the workforce continues to bear the brunt of the softening in the labour market. The percentage share of resident Professional, Managers, Engineers and Technicians (PMETs) amongst total retrenched residents continues to remain high,” says Seah.
As of 3Q19, the PMETs account for about 72% of total retrenchment. This is far more than the share of resident PMETs (56%) in the total resident employment. Additionally, degree holders account for the largest segment (50%) amongst those who were retrenched, and re-entry rate for PMETs (61% as of 3Q19) continues to trail behind the other segments of the workforce.
According to Seah, more can be done to help the PMETs. Measures such as the Career Support Programme (CSP) and the Professional Conversion Programme (PCP) have been helpful. On top of enhancing these schemes, initiatives such as a temporary deferment or extension of the income tax payment, or a one-off tax rebate of a bigger quantum for these retrenched professionals could help in alleviating their cost burden. Policymakers can also consider tax deductions to incentivise companies to hire retrenched PMETs, or upskilling and continuous training to help them to return to the workforce.
Meanwhile, GST rate will be gradually raised to 9% by 2025. With an outsized accumulated surplus of at least $15.6 billion, the government is likely to set aside some amount to fund a GST offset package. Factoring in inflation and the increase in population, the next GST offset package is expected to cost at least $5.6 to 6.0 billion over five years.
Lastly, the advancement in technology is inevitable and it is redefining many industries and jobs. Hence, policymakers will have to continue to focus on preparing Singaporeans for the future. There is a need to continue to invest in education and skills upgrading to ensure the relevance of the existing education and training schemes. More policy support in lifelong education and training can be expected.
“Overall, we expect the upcoming budget to be a well-balanced budget, aimed at alleviating near term concerns and addressing longer term structural issues. Despite high expectations amid the large accrued fiscal surplus, and immediate needs arising from the coronavirus epidemic, policymakers are expected to continue to exercise calibrated fiscal balancing,” says Seah.