The Singapore government has unveiled a budget for 2020 that is not only focused on assisting business and the broader community manage the impacts of the coronavirus, but also seeks to enable Singapore’s transformation and growth through stronger partnerships, deepening enterprise capabilities and developing the people.
Dealing with the immediate challenges – COVID-19
In announcing the Budget, Finance Minister Heng Swee Keat said the government’s immediate concern is protecting the community from the spread of the coronavirus or COVID-19, and supporting businesses and jobs impacted by the virus outbreak.
Top of the measures to stabilise and support the economy in the near term is a S$4.0 billion package to help enterprises with cash flow and keeping workers in their jobs, S$1.6 billion to assist households with the cost of living and an additional S$800 million to support the Ministry of Health and other agencies fight and contain the virus.
To support enterprises to keep staff in employment, the government announced it will offset 8 per cent of wages for three months, up to a monthly cap of S$3600 per local employee. The payment will be made to employers by the end of July and is expected to cost S$1.3 billion.
To encourage employers to continue to raise wages in this challenging period, the government will increase both the ceiling of the Wage Credit Scheme and its co-funding contribution. This means the government will assist employers by co-funding 20 per cent of wage increases for Singaporean employees in 2019 and 15 per cent in 2020; five percentage points higher than current levels.
This co-funding will be available for local employees with a gross monthly salary of up to S$5000 for the 2019 and 2020 years, up from S$4000.
To support companies with cash flow, a Corporate Income Tax Rebate will be granted for Year of Assessment 2020 at a rate of 25 per cent of tax payable capped at S$15,000 per company.
To encourage business investment, the government also announced that it will introduce accelerated depreciation on investments in plant and machinery, and renovation and refurbishment, incurred in the 2021 year of assessment.
The government will also enhance its Enterprise Financing Scheme’s Working Capital Loan component for one year by increasing the government’s share of the risks on the loans to SMEs to 80 per cent, to encourage financial institutions to support viable SMEs.
Tourism, aviation, retail, food services and point-to-point transport services, which are directly affected by the COVID-19 outbreak, will get additional support with retaining and reskilling their workers and their operating costs and cash flow.
To help Singaporeans households, the government will provide all Singaporeans aged 21 and above with a one-off cash payout of between S$100 and S$300 depending on income as well as double utilities rebates for eligible HDB households through GST vouchers. Every Singaporean with a child under 20 years old will also receive a one-time payment of S$100.
Lower income Singaporeans and families with children and elderly parents will also receive assistance through transport and grocery vouchers, GST vouchers, Passion Card top-ups, and special cash payouts.
A S$10 million grant over two years will be provided to Self Help Groups who work closely with needy family and children and a S$20 million grant for Community Development Councils to spend on local initiatives.
Minister Heng summarised that “Together, the Care and Support Package will provide a young family with about S$1,300. A three-generation family can receive more – about $1,800”.
Longer term plans for transformation and growth
To support Singapore’s vision to be the Global Asia node of technology, innovation and enterprise, the Minister introduced measures with three key objectives:
- Enabling stronger partnerships
- Deepening enterprise capabilities
- Developing people.
S$8.3 billion will be allocated over the next three years to enable the Singapore economy and companies to transform and grow.
Enabling strong partnerships
To strengthen partnerships with the rest of the world, Minister Heng says that Singapore is enhancing its digital connectivity to create new value. For example:
- Singapore Customs is connecting its Networked Trade Platform with the customs portals of its trading partners
- Singapore just concluded its first Digital Economy Agreement with Chile and New Zealand, which will “foster interoperability and address frontier issues like AI governance, to enable more trade”.
The government is also looking at strengthening partnerships within Singapore through its Research, Innovation and Enterprise 2020 Plan, sustaining investment in promising ideas, and enhancing support for Trade Associations and Chambers to deepen industry-wide capabilities.
Deepening enterprise capabilities
“Our enterprises must be the incubators for innovation, the crucibles for skills upgrading, and the creators of good jobs for our people” says Minister Heng.
The government will enhance support for enterprises at each stage of their growth:
- Starting up – with a focus on deep-tech start-ups by setting aside S$300 million under the Startup SG Equity
- Growing – through an Enterprise Grow Package and expanding the SMEs Go Digital program
- Transforming further – by introducing an Enterprise Transform Package which focuses on leadership.
In 2020, an Enterprise Leadership for Transformation Programme will be launched to support business leaders of promising SMEs to achieve the next bound of growth.
To develop the skills of Singaporeans as part of the government’s transformation and growth agenda, the Government will support local graduates of Institutes of Higher Learning to acquire cross-cultural skills and understand the region better. This will entail 70 per cent of local graduates having overseas experience, with 70 per cent of this group to have exposure to ASEAN, China or India.
To support those in the workforce, the Budget includes a one-off SkillsFuture Credit top-up of S$500 for every Singaporean aged 25 and above. The top-up will be available from October 2020 and have a five-year expiry date.
To encourage employers to hire older workers, the government will meet 20 per cent of the salary costs for six months for employers who hire local jobseekers aged 40 and above through a reskilling program. Every Singaporean aged 40 to 60 will also receive a special SkillsFuture Credit top-up, over and above S$500 given to Singaporeans aged 25 and older.
The Minister also announced that the GST rate increase will not take effect in 2021, as widely speculated. A rate hike to 9 per cent, from the current 7 per cent, by 2025 is still on the cards but the government will assess carefully the appropriate time for the increase.
When the GST rate is raised, the government will provide a S$6 billion Assurance Package to assist Singaporeans with the transition to the higher rate.
Snapshot of the Singapore budget position:
For the 2019 fiscal year the expected budget deficit is S$1.7 billion or 0.3 per cent of GDP. This is below the forecast deficit of S$3.5 billion from the last budget due to lower than forecasted expenditure.
For the 2020 fiscal year thebBudget has forecast an overall deficit of S$10.1 billion or 2.1 per cent of GDP as the government implements expansionary policies to support and stabilise a slowing economy due to the COVID-19 outbreak. Singapore has sufficient accumulated fiscal surplus to fund the overall deficit without the need to draw on past reserves.
The Ministry of Trade and Industry is forecasting Singapore’s GDP for 2020 to be between -0.5 per cent and 1.5 per cent with Minister Heng stating, “While MTI’s baseline is for GDP growth to come in at 0.5 per cent for the full year, we must be prepared that the economic impact may be worse than we projected.”