Budget 2020: Fiscal Boost to Tackle Uncertainty & Covid-19 - Singapore Exchange
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February 18, 2020
Singapore Economics
Budget 2020: Fiscal Boost to
Tackle Uncertainty & Covid-19
A $6.4bn (1.2% of GDP) Fiscal Support Package Analysts
Government sets aside S$800mn to fight the Covid-19 virus outbreak and Chua Hak Bin
provides S$5.6bn to a (1) S$4bn Stabilisation & Support package for workers and (65) 6231 5830
enterprises, and (2) S$1.6bn Care & Support package for consumers. The $4bn chuahb@maybank-ke.com.sg
package includes a corporate income tax rebate (25% for first $15k); property
Lee Ju Ye
tax rebates of 30% for hotels and MICE space, 15% for qualifying commercial
(65) 6231 5844
properties incl. retail, F&B and airports, and 10% for the two integrated resorts;
ECONOMICS
leejuye@maybank-ke.com.sg
and various tax incentives for investments.
$6bn Assurance Package to Prepare Ground for 2% GST
Hike
The GST hike will not kick in next year (but some time between 2022 and 2025),
while $6bn has been set aside to help cushion the impact and prepare the
ground. All adult Singaporeans will receive cash payouts of between $700 and
$1,600 over 5 years, to offset the additional GST.
Largest Fiscal Deficit Since 2001, But Overstates Stimulus
Singapore
This will be the largest fiscal deficit, at 2.1% of GDP, since 2001 (at 1.7%). In
absolute terms, the $10.9bn deficit is the largest in the last 20 years. But the
large fiscal deficit does not necessarily imply a large fiscal stimulus over the next
year, as many items involve sums - including the $6bn GST Voucher and $5bn
Coastal Protection Fund - to be deployed in the future. Even with the wide
deficit, the accumulated fiscal surplus in the current government term (FY2016
to FY2020) amounts to a comfortable $7.7bn, which will be transferred to the
Past Reserves at the end of the term.
The revised fiscal deficit for FY2019 was a narrower $1.7bn (0.3% of GDP) from
the budgeted $3.5bn (0.7% of GDP). This was mainly due to lower-than-expected
expenditure, especially in the defence and transport sectors. Operating revenue
($74.7bn) – for which the higher-than-expected Stat Board contribution was
offset by lower-than-expected collections in GST and auto-related taxes - and
NIRC ($17bn) came in close to the original budgeted amount.
Negative: Tightening of Foreign Labour Measures for
Construction, Marine Shipyard & Processing
A surprise tightening of foreign worker measures from 2021 will be negative for
the construction, marine shipyard and processing industry. The S pass DRC will be
reduced further from 20% to 18% by 1 Jan 2021 and 15% for 1 Jan 2023. This
comes on top of stricter DRC ratios over 2020-21 for the services sector
announced in Budget 2019. Some firms may be forced to shut down and leave
Singapore. In particular, the marine & offshore sector is already performing
poorly with output plunging by -19% in 2019, recording the lowest level in 15
years.
Expanding SkillsFuture to Employers
Singaporeans will receive a $500 top-up, while those aged 40-60 will receive an
additional $500. Employers will receive a $10k SkillsFuture Enterprise credit to
cover 90% out of pocket workforce transformation programs. About 35k
enterprises are expected to benefit. Employers who hire from reskilling programs
can receive 20% salary support for 6 months, capped at $6k.
THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH Co. Reg No: 198700034E MICA (P) : 099/03/2012
SEE PAGE 7 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONSEconomics Research
Targeted Social Support for Households and Elderly
The $1.6bn Care and Support Package targets support for the lower-income group.
This includes a cash payout of up to $300 for every adult; an additional GST
Voucher – U-Save for eligible HDB households; and $100 in Grocery Vouchers (for
those in 1 & 2-room HDB flats) for 2020 and 2021. Support for elderly is enhanced
with Matched Retirement Savings Scheme, under which the government will
match every dollar top-up to the CPF Retirement Account (annual cap of $600),
and a 20% increase in quarterly cash payouts under the Silver Support Scheme.
The government will spend more to support education for all levels, especially
for pre-school (to double spending to over $2bn per year).
Preparing for Climate Change
Government will set aside a $5bn coastal and flood protection fund; expand
charging infrastructure for electric vehicles; and target all HDB towns to be eco-
friendly by 2030. Vision is to phase out ICE vehicles and have all vehicles on
cleaner energy by 2040. Measures include EV Early Adoption Incentive, such as
fee rebate.
Is the Package Sufficient?
The relief package may be sufficient to help firms cope with a short-lived one
quarter contraction, but may not be enough if the virus outbreak and
contraction lasts for two quarters. The government also did not provide
waivers/rebates for foreign worker levies for impacted sectors (which it did for
hotels under SARS), perhaps to send a signal about the shift away from depending
on foreign workers. Budget 2020 did not grant any broader personal income tax
rebates, opting for more targeted support. Higher future GST and tighter foreign
worker quotas for construction, marine and processing may however negate some
of the fiscal support.
Table 1: $6.4bn Fiscal Support Package
Amount
Measures Details
($mn)
A) Additional amount allocated to To support frontline agencies containing the outbreak, with bulk of it going to the Ministry of
800
fight the outbreak Health
B) Stabilisation and Support Package 4,000 To stabilise the economy and support workers and enterprises
To help firms retain local workers - employers will receive an 8% cash grant on the wages of each
Jobs Support Scheme 1,300
local employee from Oct to Dec 2019, subject to a monthly cap of $3,600
Raise monthly wage ceiling from $4k to $5k, for qualifying wage increases given in 2019 & 2020;
Enhancement to Wage Credit Scheme 1,100
and raise the government co-funding levels for 2019 & 2020 from 15% to 20%
Corporate Income Tax Rebate of 25% of tax payable, capped at $15k; enhancement of tax
Help businesses with cash flow treatments under the Corporate Tax System; enhance the Enterprise Financing Scheme's Working
Capital Loan component
Enhancement to Adopt & Grow Retrain and reskill workers through redeployment programmes in the tourism, aviation, retail and
Initiative food services sectors
Property Tax Rebate For qualifying commercial properties (see Table 4)
6-month period assistance to help defray business costs and protect jobs, and safeguard Changi's
Aviation Sector 112
air connectivity
Maritime Sector 1 50% port dues concession to cruise ships and regional ferries from Mar 2020 to Aug 2020
C) Care and Support Package 1,600 To help Singaporeans with their household expenses during this period of uncertainty
Adult Singaporeans aged 21 & above to receive a one-off cash payout between $100 and $300
Care and Support - Cash (depending on income). An additional cash payout of $100 if the adult has at least one child below
21 years old
One-off GST Voucher - U-Save Special Payment for eligible HDB households. Additional GST
GST Vouchers
Voucher - U-Save rebate for larger households with 5 or more members
Service and Conservancy Charges Extension of S&CC rebate by another year. Eligible HDB households to receive 1.5 to 3.5 months of
(S&CC) Rebate rebates
Workfare Special Payment for lower- Low-wage workers to receive an additional 20% of their WIS payment for 2019, with a minimum
income workers payment of $100
Needy Singaporeans (living in 1-room & 2-room HDB flats and do not own more than one property)
Grocery Vouchers
to receive vouchers worth $100 each year in 2020 and 2021
All Singaporeans aged 50 and above, including the Pioneer Generation and Merdeka Generation, to
PAssion Card Top-Up
get $100 top-up to PAssion Card
Grants to Self-Help Groups and
30 To help fund community programmes to support needy households
Community Development Councils
Source: Budget 2020, compiled by Maybank Kim Eng
February 18, 2020 2Economics Research
Table 2: Fiscal Position in FY2018 to FY2020
FY2018 FY2019 FY2019 FY2020 Change over revised
(Actual) (Budgeted) (Revised) (Budgeted) FY2019
SGD mn SGD mn SGD mn SGD mn SGD mn % change
OPERATING REVENUE 73,738 74,895 74,727 76,010 1,283 1.7
Corporate Income Tax 16,032 16,722 16,754 17,095 341 2.0
Personal Income Tax 11,706 11,797 12,200 12,514 314 2.6
Withholding Tax 1,590 1,541 1,660 1,701 41 2.5
Statutory Boards’ Contributions 1,490 1,294 1,798 2,589 791 44.0
Assets Taxes 4,649 4,690 4,746 4,646 -100 -2.1
Customs, Excise and CarbonTaxes 3,075 3,502 3,319 3,597 278 8.4
Goods and Services Tax 11,137 11,691 11,183 11,273 90 0.8
Motor Vehicle Taxes 2,623 3,094 2,458 2,268 -190 -7.7
Vehicle Quota Premium 3,616 3,420 2,902 2,635 -267 -9.2
Betting Taxes 2,664 2,673 2,637 2,634 -3 -0.1
Stamp Duty 4,607 4,024 4,297 4,286 -11 -0.3
Other Taxes 6,629 6,693 6,825 6,671 -154 -2.3
Fees and Charges 3,490 3,376 3,479 3,620 141 4.1
Others 430 379 469 482 13 2.8
Less:
TOTAL EXPENDITURE 77,824 80,252 78,163 83,608 5,445 7.0
Operating Expenditure 57,561 60,786 59,546 64,599 5,053 8.5
Development Expenditure 20,263 19,466 18,617 19,010 393 2.1
PRIMARY SURPLUS / DEFICIT -4,086 -5,357 -3,436 -7,598
(% of GDP) (-0.8%) (-1.1%) (-0.7%) (-1.5%)
Less:
SPECIAL TRANSFERS 8,989 15,297 15,265 21,982 6,717 44.0
Special Transfers Excluding Top-ups to
1,689 1,737 1,697 4,662
Endowment and Trust Funds
BASIC SURPLUS / DEFICIT -5,774 -7,094 -5,133 -12,260
Top-ups to Endowment and Trust Funds 7,300 13,560 13,568 17,320
Add:
GST Voucher Fund 6,000
Coastal and Flood Protection Fund 5,000
National Research Fund 2,000
Skills Development Fund 2,000
Special Employment Credit Fund 400 370 700
Other Funds 13,200 1,620
NET INVESTMENT RETURNS CONTRIBUTION 16,413 17,169 17,048 18,632 1,584 9.3
OVERALL BUDGET SURPLUS / DEFICIT 3,339 -3,485 -1,653 -10,948
(% of GDP) (0.7%) (-0.7%) (0.3%) (-2.1%)
Source: Ministry of Finance
Fig 1: FY2020 Budget Deficit (2.1% of GDP) Expected to be the Widest in 20
Years
SGD bn
Overall Budget Balance % of GDP (RHS)
15 3
10 2
5 1
0 0
-5 -1
-10 -2
-15 -3
FY00 FY02 FY04 FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20
Source: Budget 2020, CEIC
February 18, 2020 3Economics Research
Table 3: Government’s Accumulated Surplus
Govt
Govt Budget Accumulated
Revenue: Special
Expenditure: Surplus/ Surplus/
Operating: Transfers
Total Deficit Deficit
Total
SGD mn SGD mn SGD mn SGD mn SGD mn
After May 2006 election
FY2007 40,375 32,982 2,142 7656
FY2008 41,086 38,091 7,099 239
FY2009 39,547 41,891 5,481 -819 12,059
FY2010 46,060 45,338 7,095 980
FY2011 51,077 46,563 8,427 4003
After May 2011 election
FY2012 55,815 49,004 8,860 5821
FY2013 57,020 51,728 8,584 4998
7,341
FY2014 60,838 56,648 12,356 572
FY2015 64,823 67,447 10,369 -4050
After Sep 2015 election
FY2016 68,964 71,045 6,372 6,125
FY2017 75,816 73,556 6,122 10,861
FY2018 73,738 77,824 8,989 3,339 7,724
FY2019 74,727 78,163 15,265 -1,653
FY2020 76,010 83,608 21,982 -10,948
Source: CEIC, Budget 2020
Table 4: Details of Property Tax Rebate for Qualifying Commercial Properties
Property Tax
Property Tax Payable for
Rebate Rate (%)
Accommodation and function room components of *hotel buildings
Accommodation and function room components of serviced apartment
buildings
Meetings, Incentives, Conventions and Exhibitions (MICE) space components of
following prescribed MICE venues: 30%
Suntec Singapore Convention & Exhibition Centre
Singapore EXPO
Changi Exhibition Centre
Other qualifying commercial properties. Examples include:
Premises of an international airport
Premises of an ^international cruise or regional ferry terminal 15%
Shops (e.g. retail and F&B), including those within hotel buildings,
serviced apartment buildings, and prescribed MICE venues; &
Premises of tourist attractions
Marina Bay Sands
10%
Resorts World Sentosa
Above property tax rebates of 30%, 15% & 10% do not apply to premises or a part of any premises
used for a residential, industrial or agricultural purpose, or as an office, a business or science
park, or a petrol station
* Refers to hotels licensed under the Hotels Act.
^ Refers to Marina Bay Cruise Centre, Singapore Cruise Centre, and Tanah Merah Ferry Terminal
Source: Budget 2020
February 18, 2020 4Economics Research
Table 4: Reduction in S Pass Sub-Dependency Ratio Ceiling for Fig 2: S Pass Holders at Around 198k as of June 2019
Construction, Process & Marine Shipyard
Sector Current Changes
Person th
DRC S Pass Holders %YoY (RHS)
220 30
To be reduced to 35% on 1 January 2021
Services 38% 198
as announced at Budget 2019 200 196
Manufacturing 60% No change 184 25
179 180
Construction 87.5% No change 180 170
161 20
Process 87.5% No change 160
Marine Shipyard 77.8% No change 142
140 15
S Pass sub-DRC
To be reduced to 10% on 1 January 2021 120 114
Services 13% 10
as announced at Budget 2019
Manufacturing 20% To be considered for reduction in future 100
Construction 5
80
To be reduced to 18% on 1 January 2021,
Process 20%
and to 15% on 1 January 2023. 60 0
Marine Shipyard '11 '12 '13 '14 '15 '16 '17 '18 '19
Note: When a DRC or a sub-DRC cut is implemented, firms will not be able to Note: Refers to year-end numbers except for 2019 (as of June).
renew work passes of foreign workers that have exceeded the revised DRC or sub-
Source: Ministry of Manpower
DRC. However, for the foreign workers above the DRC/sub-DRC limits, firms can
retain them until their work passes expire to avoid disrupting existing operations.
Source: Budget 2020
Table 6: Foreign Worker Levy Schedule
Dependency Ratio Levy Rates ($) (R1/R2)
Sector Tier
Ceiling (DRC) 1 Jul 2019 1 Jul 2020 1 Jul 2021
Basic Tier (All) ≤10% 330 330 To be
S-Pass announced in
Tier 2 10-20% 650 650 2021
Basic Tier 300/700 300/700 300/700
Construction WPH ≤87.5%
MYE-Waiver 600/950 600/950 600/950
Basic Tier ≤10% 300/450 300/450
Services WPH Tier 2 10-25% 400/600 400/600
Tier 3 25-38% 600/800 600/800
350/500 350/500
Marine Shipyard WPH Basic Tier ≤77.8%
300/400 300/400
To be
300/500 300/500
Basic Tier announced in
300/450 300/450
Process WPH ≤87.5% 2021
600/800 600/800
MYE-Waiver
600/750 600/750
Basic Tier ≤25% 250/370 250/370
Manufacturing Tier 2 25-50% 350/470 350/470
Tier 3 50-60% 550/650 550/650
Note: Numbers in red refer to Foreign Worker Levy rates announced in Budget 2020. Strike-outs refer to earlier-
announced levy rates (i.e. before Budget 2020) which were deferred.
Source: Budget 2020
February 18, 2020 5Economics Research
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Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (including dividends) HOLD Return is expected to be between 0% to 10% in the next 12 months (including dividends) SELL Return is expected to be below 0% in the next 12 months (including dividends) Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. February 18, 2020 8
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