‘Unusual’ plan to help Covid economic recovery


A man wearing a protective face mask walks past an indoor waterfall at Jewel Changi Airport in Singapore.

Roslan Rahman | AFP | Getty Images

SINGAPORE — With the Singapore economy still reeling from the pandemic-induced downturn, analysts expect the government to incur a rare budget deficit at the start of its new term in office.

“This will be unusual as the government typically starts the first year of its new term with a sizeable budget surplus,” economists from brokerage Maybank Kim Eng said in a late-January report.

“However, with the economy in need of continued support to climb from the steepest recession in Singapore’s history, the current term of government will likely start with a deficit in FY2021,” they said.

Singapore held its general election last July in the middle of the Covid-19 pandemic. So budget 2021 — which will be delivered by Finance Minister Heng Swee Keat on Tuesday — is the first for the current term of government.

The country’s constitution requires the government’s revenue and expenditure to be balanced over a typical five-year term. In the last few electoral cycles, the government accumulated surpluses early in its term — which allowed it to fund bigger budgets later.   

The Singapore government’s fiscal prudence is one reason behind its coveted AAA credit ratings by international agencies.

However, Prime Minister Lee Hsien Loong has warned that with the coronavirus pandemic hitting the economy, his government “may take a while” to “come back to prudence and balanced budgets.”

Like many governments globally, Lee’s team spent big last year to soften the economic blow from the pandemic. The Southeast Asian city-state dug into its reserves to fund part of its stimulus package worth more than 90 billion Singapore dollars ($67.5 billion) — or around 20% of gross domestic product.

Starting the first fiscal year in the red could prove to be challenging amid uncertainty to the fiscal outcome in the subsequent fiscal years.

Irvin Seah

Senior Economist, DBS

What to expect in Budget 2021

Economists are divided on how much deficit the government can afford to incur so early into its term.

Economist from Maybank Kim Eng forecast a deficit of around 4% of GDP. Others such as Irvin Seah from DBS bank projected a smaller shortfall.

“Starting the first fiscal year in the red could prove to be challenging amid uncertainty to the fiscal outcome in the subsequent fiscal years,” Seah wrote in a mid-January report. He forecast a deficit of around 2.1% to 2.5% of Singapore’s GDP.

“Moreover, the government may want to keep its powder dry to guard against any unforeseen shocks to growth in 2021,” he added.

… the government may want to keep its powder dry to guard against any unforeseen shocks to growth in 2021

Irvin Seah

Senior Economist, DBS

Seah said budget 2021 will likely be “very targeted.”

Singapore’s economy is recovering from the pandemic hit, so the government would channel its finances to support vulnerable segments of the society and still-struggling industries, said the economist.

Here’s what economists expect to see in the budget:

  • Measures to subsidize wages, create new jobs and support upskilling of workers, especially for the worst-hit sectors such as tourism and aviation.
  • Cash handouts to help households manage living expenses, and schemes to supplement income of low-wage earners.
  • Cash-flow support to help badly affected businesses stay afloat, and funding for start-ups to promote entrepreneurship.
  • Incentives to encourage wider adoption of low-emission vehicles; as well as support efforts to increase solar capacity and research into other renewable energy.



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