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Tuesday, May 26, 2020, 18:37
Singapore focuses on jobs in new US$23 billion virus relief
By Bloomberg
Tuesday, May 26, 2020, 18:37 By Bloomberg

In this March 14, 2020 photo, a couple wearing face masks walk past the Merlion statue in Singapore. (EE MING TOH / AP)

Singapore’s Deputy Prime Minister and Finance Minister Heng Swee Keat delivered a fourth fiscal package of S$33 billion (US$23 billion) to counter the economic fallout of the coronavirus, providing specific support to saving jobs.

The latest measures will help businesses and workers affected by border closures and movement restrictions, Heng said in a Parliament session Tuesday. The steps will push this fiscal year’s budget deficit to 15.4 percent of gross domestic product (GDP), the largest gap in the country’s history.

“The central focus of this budget is jobs,” Heng said. “Large parts of the last three budgets were directed at protecting the livelihoods of our workers. In this budget, we will do even more.”

The new package takes Singapore’s total support to S$92.9 billion, or 19.2% of gross domestic product, Deputy Prime Minister and Finance Minister Heng Swee Keat said

The new package takes Singapore’s total support to S$92.9 billion, or 19.2 percent of GDP, Heng said. The government is trying to cushion an economy potentially headed for its worst contraction since Singapore’s independence and will tap another S$31 billion in past reserves, bringing the total drawn from reserves this financial year to S$52 billion.

ALSO READ: Singapore adds US$3.5b to stimulus to combat coronavirus

“The numbers really jump out at you,” as stimulus spending near 20 percent of GDP “puts us in the league of Germany and Japan,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. She said the measures struck a good balance between supporting individuals and industries suffering now, and preparing for a post-COVID world “where digital transformation and more disruptions will be the norm.”

The local dollar, which rose earlier in the day on first-quarter GDP data that wasn’t as bad as feared, was up 0.40 percent at 1.4191 per US dollar as of 5:45 pm. The benchmark stock index maintained gains after the announcement of the new virus relief, up 1.3 percent.

Phased opening

Singapore is starting to reopen its economy in three phases. Most businesses are expected to re-open by July, though sectors such as aviation and tourism could take longer, Heng said Tuesday.

Measures in the fourth stimulus package include:

  • Extension of foreign-worker levy waiver and rebate, for two months, for businesses employing migrant workers that had to suspend operations

  • Cash grant, totaling about S$2 billion, to offset rental costs for small- and medium-sized enterprises

  • S$500 million to help businesses in their digital transformations, including helping stall owners at hawker centers and wet markets to adopt e-payments systems

  • Pledge to create 15,000 public-sector jobs, and cooperate with private sector to create 25,000 openings

  • Expands a traineeship program for local first-time job seekers

  • Targeted support for mid-career job seekers aged 40 and above, including coverage of 40 percent of eligible workers’ salaries over six months, to a maximum of S$12,000

  • Sets aside an additional S$13 billion in contingency funds for rapid response to virus-related developments

Singapore was among the first governments in the region to unveil stimulus measures in February to counter losses from the pandemic, with the bulk coming in March via a S$48 billion package that included wage subsidies and cash handouts. Officials have expanded support since then as economic losses mount amid global restrictions on trade and travel.

Data earlier Tuesday showed the stimulus has been unable to thwart a severe downturn in the trade-reliant economy, with gross domestic product expected to contract 4 percent to 7 percent this year, far more than previously expected. While recent monthly data like exports and manufacturing showed a surprise gain in April, that was mostly due to a jump in pharmaceuticals from a low base a year earlier.

ALSO READ: S'pore sees sharper economic slump as virus spreads globally

President Halimah Yacob has already given in-principle support for the government to tap past reserves to help finance the latest stimulus package.

Heng addressed the risk of a second wave of virus cases as the economy reopens.

Singaporeans must “be psychologically prepared for setbacks, before we safely transition to a new normal and build a COVID-safe nation,” he said. “The global economy is unlikely to recover quickly. We must be prepared for tough times in the months ahead.”

Data earlier Tuesday showed the stimulus has been unable to thwart a severe downturn in the trade-reliant economy, with GDP expected to contract 4% to 7% this year

The downgrade in Singapore’s growth outlook was despite an improvement in first-quarter GDP, which declined an annualized 4.7 percent from the previous three months, far better than the 10.6 percent drop estimated earlier. That was mainly due to growth in pharmaceuticals manufacturing, which helped offset the slump in electronics.

Gradual recovery

With the “circuit-breaker” restrictions on residents’ movements taking effect only in April, “the real damage will be from the second quarter onward,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd in Singapore. “Reasonable doubts about the speed and amplitude of demand recovery cannot be brushed aside.”

Singapore will begin easing the circuit-breaker measures from June, to be replaced by a three-phase system to further reopen the economy.

READ MORE: S'pore govt says three quarters of economy to resume work June 2

“How the Singapore economy performs in the second half of 2020 will depend in part on whether we are able to continue to contain the domestic outbreak after we emerge from the circuit-breaker period,” Gabriel Lim, permanent secretary for the Ministry of Trade and Industry, said in an online briefing to reporters.

While the economy will gradually recover over the second half of the year, labor market conditions are expected to deteriorate, according to the Ministry of Manpower. There is “considerable uncertainty” and the country must be prepared for retrenchments, it said.

Singapore’s central bank, which took unprecedented easing steps in March to bolster the economy, sees monetary policy as appropriate, with the next review scheduled for October, Deputy Managing Director Edward Robinson said at the GDP briefing. Local interest rates will remain low given the very accommodative policies pursued by major central banks, he said.

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