DBS Focus Singapore: The government takes out big fiscal guns
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Economics & Strategy
DBS Focus
Singapore: The government takes out big fiscal guns
Economics/growth/fiscal
Group Research March 27, 2020
Irvin Seah 30
• The government has introduced a fiscal support package worth
Senior Economist
SGD48.4bn to shield the economy from the Covid-19 outbreak
• A drawdown of SGD17bn from a pool of past savings has also
been announced to finance part of the package
• The key focus of the stimulus package is to help companies
weather the crisis and to mitigate against potential job losses
• With this supplementary budget, overall fiscal deficit for FY2020
Please direct distribution
has soared to SGD39.2bn, approximately 7.8% of nominal GDP
queries to
Violet Lee +65 68785281
violetleeyh@dbs.com • Singapore is facing acute supply and demand shocks, with GDP
likely contract by nearly 3% this year. The fiscal package, as large
as it is, will only partially offset the downside to the economy
• We expect additional supporting measures through the course
of this year if the global crisis worsens. MAS is likely to play an
important supportive role is stabilising the financial sector.
In response to the fast deteriorating situation on the Covid-19 outbreak
and the corresponding impact on the Singapore economy, the
government has rolled out an unprecedented fiscal stimulus package
named the Resilience Package, which is worth SGD 48.4bn. Together
with the previous budget measures of total SGD 6.4bn, the overall fiscal
response for the Covid-19 outbreak thus far has amounted to SGD
54.8bn, approximately 11% of GDP. The government has also decided
to draw down SGD 17bn from past reserves to finance part of this
stimulus package. While the quantum may be far higher than expected,
it may prove to be necessary considering the severity of the crisis
confronting the economy.
A deep recession
Latest first quarter advance GDP estimates (-2.2% y/y, -10.6% q/q saar)
announced yesterday has confirmed the fear that a recession is
inevitable amid the impact of the Covid-19 outbreak. We have
Refer to important disclosures at the end of this report.Singapore: The government takes out big fiscal guns March 27, 2020
correspondingly lowered our full year growth forecast to -2.8%, which
Singapore's historical GDP growth and past recessions
%
16
14
12
10
8
6
4
2
0
-2 GFC
Mfg Dot.com Covid-19
-4 recession AFC bust outbreak
1980 1985 1990 1995 2000 2005 2010 2015 2020f
Source: CEIC, DOS, DBS
is deeper than the Asia Financial Crisis and the Global Financial Crisis [1].
The economy is entering uncharted waters, and this could well
become the worst recession ever for Singapore. The threats to the
underlying fundamentals of the economy is unparalleled. Unlike the
past slowdowns, which are mainly externally driven and exacerbated by
poor sentiments, this crisis has an added complexity as economic
activities around the world have been severely disrupted by the strict
measures imposed to curb the pandemic.
The increasing stiffer control measures will take a huge toll on the
economy. Within Singapore, a set of more restrictive measures have
An attempt to stem been put in place over the past one week amid sharp spikes in imported
job losses cases from returning residents, as well as more local transmissions.
Beyond the existing negative shocks to the economy, these additional
measures will further compound the financial pain on many local
companies, and inevitably resulting in sharp spikes in job losses. In fact,
we expect total retrenchment this year to top 24,500, up from an
annual average of about 14,500 in a normal year.
The Resilience Package
In light of the risk to employment, the key focus on the Resilience
Package is to help companies weather the crisis so as to mitigate
against potential job losses. There are measures aimed at protecting
jobs, supporting the self-employed and families, as well as economy
Page 2Singapore: The government takes out big fiscal guns March 27, 2020
wide measures to help companies, and targeted support for industries
that are worst affected by the outbreak [2].
Helping Singaporeans
Some of the key initiatives for individuals and families include the
Enhanced Jobs Support Scheme (JSS), which covers 25% of monthly
wages for every local worker in employment, capped at $4,600, for 9
months till end-2020. This is a wage subsidy which helps to defray
manpower costs for companies and lower the risk of retrenchment. In
addition, the COVID-19 Support Grant was introduced, which aims at
providing financial help to retrenched Singaporeans and their families
who are affected by the Covid-19.
Job creation initiatives such as the SGUnited Jobs and the SGUnited
Traineeship were introduced to help unemployed Singaporeans and
fresh graduates find jobs despite the grim employment prospects. A
package that specially focused on the self-employed persons was also
announced, along with even higher cash payouts for initiatives within
the Care and Support Package. Beyond that, student loan repayments
and interest charges will be waived for one year while late payment
charges for HDB mortgage arrears will be suspended for 3 months.
The Workfare Special Payment announced will also be increased to
$3,000 in cash [3]. These measures will go a long way to alleviate the
cost burden for many Singaporeans.
Helping companies Supporting companies
on cashflow and
costs A slew of measures was announced to help companies address their
concerns on cashflow, costs and credits. There are economy-wide relief
measures and targeted schemes for some industries.
Specifically, commercial property tax rebates have been raised, with
industries worst hit by the outbreak getting up to 100% rebate. The
scope of the initiative has also been enlarged to cover all non-residential
properties. Rental waivers for government agency operated
commercial premises have also been raised. Beyond the wage support
measures, these additional measures should help to alleviate the
concerns on cost burden for companies.
More importantly, companies facing cashflow difficulties will get more
help. The Temporary Bridging Loan programme has been expanded to
cover all industries and the quantum has been raised to $5mn, which is
Page 3Singapore: The government takes out big fiscal guns March 27, 2020
in line with our expectations [4]. The Working Capital Loan scheme has
also been enhanced with a bigger quantum of $1mn, from $600,000
previously. Additional loan scheme was introduced to cover trade
financing while help was also provided to cover loan insurance
premiums. All these should help to ensure enough liquidity to sustain
companies during this crisis.
Additional support will also be given to industries that are most affected
by the outbreak. The aviation, tourism and F&B industries will get wage
offsets of between 50-75% under the Enhanced Jobs Support Scheme.
In addition, the aviation and tourism industries will receive relief
packages of $440mn in total to help them tide over this crisis. For the
transport sector, a Special Relief Fund payment of $300 per vehicle per
month will be given to tax drivers and private hire car drivers up till end-
Sept. Operators and private bus owners will also get some help in road
tax rebate and waivers in parking charges.
An unprecedented fiscal push
Considering the additional measures introduced in this supplementary
budget, the revised budget is expected to see a primary deficit of SGD
18.3bn, up from the previous projection of SGD 7.6bn. Coupled with an
Tapping on
reserves to fund outsized special transfer package of SGD 39.6bn, and maintaining the
part of the package assumption on the Net Investment Returns Contribution at SGD 18.6bn,
overall fiscal deficit is now expected to soar to SGD 39.2bn,
approximately 7.8% of GDP.
Singapore's overall fiscal position
Estimated Revised Chg over
FY2020 FY2020 revised
SGD bn SGD bn % change
Operating revenue 76.00 70.80 -5.2
Less:
Total expenditure 83.60 89.10 5.5
Primary surplus/deficit -7.60 -18.30
Less:
Special transfers 22.0 39.6 17.6
Special transfers excluding top-ups to
4.7 22.3
endownment and trust funds
Basic surplus/deficit -12.3 -40.5
17.3 17.3
Top-ups to endownment and trust funds
Add:
Net Investment Returns Contribution 18.60 18.60
Overall surplus/deficit -11.0 -39.2
Overall balance as % of GDP 2.1 7.8
Page 4Singapore: The government takes out big fiscal guns March 27, 2020
Part of the deficit will be covered by the accumulated surplus of about
SGD 19bn while the government has also drawn down SGD 17bn from
past reserves to finance schemes such as the Enhanced JSS (SGD 13.8),
support for the self-employed (SGD 1.2), the Aviation Support Package
(SGD 350mn), as well as the enhanced financing schemes (SGD 1.7bn).
This also implies a marginal gap of about SGD 3.5bn, which can be
covered by adjustments in some of the components or possible
liquidation of government assets.
The situation on the global pandemic remains fluid. Stress in the global
financial system and political risks in some countries could emerge.
There could be more downside risks to the global outlook. Indeed,
Singapore is heading into uncharted waters, which calls for
unprecedented fiscal push to buffer the economy from the incoming
storm. This is the single largest fiscal outlay by the government since
the 2009 global financial crisis and we believe it will certainly help the
economy weather the impact of the crisis.
Notes:
[1] Please refer to DBS report “Singapore: A deep recession” dated 26
Mar20
[2] Kindly refer to MOF website for more details
[3] Previously, this year's Budget gave those on Workfare last year a
one-off payment amounting to 20 per cent of their 2019 payout,
with a $100 minimum
[4] Please refer to DBS report “Singapore: Heading for a recession”
dated 19 Mar20
Page 5Singapore: The government takes out big fiscal guns March 27, 2020
Sources: Data for all charts and tables are from CEIC, Bloomberg and DBS Group Research (forecasts and transformations).
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