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Government support measures will prevent GDP from contracting by a further 5.6% in 2020, and 4.8% in 2021, says DPM Heng

Felicia Tan
Felicia Tan10/5/2020 5:20 PM GMT+08  • 5 min read
Government support measures will prevent GDP from contracting by a further 5.6% in 2020, and 4.8% in 2021, says DPM Heng
On Oct 3, he announced via Facebook that there will not be an additional round of support measures.
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The close to $100 billion in relief measures from the government has helped cushioned Singapore’s steepest economic contraction in history, said Deputy Prime Minister and Finance Minister Heng Swee Keat on Oct 5.

The grants, reliefs, and subsidiaries, announced across four budgets since March, has prevented Singapore’s economy from contracting by a further 5.6% in 2020 and 4.8% in 2021, according to the Monetary Authority of Singapore (MAS).

Presenting the revised revenue estimates to Parliament, Heng stressed that the total draw on past reserves remains at $52 billion.

See also: Aerospace, aviation, and tourism sector to get additional support of $507 mil: DPM Heng

He added that the government is expecting operating revenues to be 16% lower than initial estimates presented in February 2020 during the Unity Budget, and that revenue collections are expected to fall across all revenue categories.

While the government expects the republic’s revenue position to be weak amid the lingering economic effects arising from Covid-19, its expenditure will increase on continued support for Singaporeans and businesses.

See also: 'The government will always be on the side of Singaporeans', says PM Lee, on the subject of foreign workers

Heng also highlighted that the country “must be careful” not to “squander” what previous generations have “painstakingly built up”.

On Oct 3, he announced via Facebook that there will not be an additional round of support measures.

“At this stage of the crisis, my team and I are fully committed to support our workers and businesses by refining our policies, expanding outreach and improving implementation, to make the most of the $100 billion committed to the fight against COVID-19. We hope that businesses and workers can make the best use of the measures that have been committed,” he wrote.

The support measures will also help to save about 155,000 jobs or 1.7 percentage points, though there will still be job losses on the whole.

“More than half the jobs saved are due to the Jobs Support Scheme or JSS alone,” Heng said.

See also: Singapore's factory activity continues growth trend for third month in August

A one-off additional support for newborns will also be provided on top of the Baby Bonus Cash Gift, which provides eligible parents with up to $10,000 in benefits.

The support comes in response to parents potentially postponing their plans for parenthood amid the uncertainties of the Covid-19 pandemic.

Heng also said that the government will extend the Enhanced Training Support Package (ETSP) till June 30, 2021.

The package, which is extended for another six months, will provide enhanced course fee subsidies for firms in hard-hit sectors.

The ETSP will be extended to the offshore & marine sector from Oct 5, on top of existing sectors such as air transport, retail and tourism.

The Temporary Bridging Loan Programme will also be extended for another six months at reduced levels, till September 2021.

To accelerate Singapore’s transformation into an innovation-led economy, the DPM announced that the government’s new five-year Research, Innovation and Enterprise (RIE) plan will be unveiled in December.

The plan will support areas including early childhood development, lifelong learning and ensuring healthy seniors, building on earlier investments and enhancing previous research initiatives.

OCBC's head of treasury research and strategy Selena Ling says the decision to extend key programmes such as the Temporary Bridging Loan Program and the MAS SGD facility for ESG loans, as well as other grant and program enhancements should be "welcomed by the private sector".

"In particular, the extension of the loan moratorium which had been in discussion may be important as the year-end expiry is coming up soon and policymakers are keen to avoid a cliff effect given the still-weak economy and soft labour market," she says.

Ling adds that while the Singapore economy is slowly regaining its footing, it is "still far from pre-Covid levels for many specific industries like aviation, hospitality, entertainment, construction and retail", which is a why a "more targeted and calibrated approach may be the way to go," she adds.

"Without further tapping of fiscal reserves, this is probably as far as budgetary policy assistance goes for now. Of course, if the global and domestic economics do not further improve by the time 1Q2021 swings around, then we cannot rule out that the 2021 Budget may again offer fresh fiscal assistance. Meanwhile, the transition to Phase 3 may also bode well for the Singapore economy as social distancing measures are relaxed further," she notes.

According to Ling, the key strategic priorities outlined are remaking Singapore as a GlobalAsia node of technology, foster inclusive growth, which includes still bringing in global talent, and investing in economic resilience and sustainability.

The way she sees it, these are "lofty objectives", but for the man on the street, the key takeaways from Heng's speech may be the one-off additional support for newborns on top of the Baby Bonus Cash Gift, financial aid and support schemes ad rebates for utility bills, and the first tranche of grocery vouchers and S&CC rebates for eligible households, as well as the next Workfare Special Payment in October for eligible low-income workers," says Ling.

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