Budget 2021: S$11b for Covid relief, and even more to fortify future
S$24b earmarked for economic transformation over next three years: to boost business, catalyse capital and redesign and create jobs.
While Budget 2021 puts S$11 billion towards continued Covid-19 relief - drawing on past reserves for the second straight year - it devotes more to the future, including S$24 billion to help firms and workers "emerge stronger" over the next three years.
Last year's Budgets and this year's Covid-19 Resilience Package are about "preservation and adaptation" amid an emergency. But the focus this year is on structural change, said Deputy Prime Minister and Finance Minister Heng Swee Keat in his Budget speech on Tuesday.
Industry bodies cheered the approach, with Association of Small & Medium Enterprises (ASME) president Kurt Wee calling the Budget "spot-on" in giving relevant help to firms, while the Singapore Malay Chamber of Commerce and Industry said it "strikes a reasonable balance between SMEs' short-term and long-term needs".
In the Covid-19 crisis, Singapore saw its largest post-independence overall budget deficit of S$64.9 billion in FY2020, amounting to 13.9 per cent of gross domestic product (GDP).
This year's Budget, while remaining expansionary, is expected to have a more modest overall deficit of S$11 billion or 2.2 per cent of GDP.
The government also proposes to draw on past reserves for the S$11 billion Covid-19 Resilience Package, given "the extraordinary and temporary nature" of its measures.
With a draw of up to S$52 billion approved for FY2020 but S$9.3 billion set to be unused, this takes the total expected draw on past reserves for FY2020 and FY2021 to S$53.7 billion - a net increase of S$1.7 billion from what the government originally expected to draw for the crisis.
The Covid-19 Resilience Package sets aside S$4.8 billion for public health and safe re-opening measures, including vaccination.
Another S$5 billion is in continued support for firms and workers. Of this, S$2.9 billion is for the Jobs Support Scheme, including S$700 million to extend its duration by six months for the hardest-hit Tier 1 sectors - aviation, aerospace, and tourism - and three months for the Tier 2 sectors of food services, retail, marine and offshore, and arts and entertainment.
The remaining S$1.2 billion is targeted support for specific sectors, with aviation receiving the lion's share of S$870 million.Singapore, like many countries, has devoted significant resources to save lives and livelihoods in this pandemic, said Mr Heng. "But what will continue to distinguish Singapore are our investments for the future."
Beyond this crisis, Budget 2021 allocates S$24 billion for economic transformation over the next three years, with three broad goals: developing a vibrant business community; catalysing capital; and redesigning jobs and creating job opportunities.
The first goal includes restoring Changi Airport's connectivity and building platforms for innovation.
In the area of capital, the government will extend risk-sharing arrangements with providers of capital and provide grants for transformation.
As for jobs, S$5.4 billion will fund the second tranche of the SGUnited Jobs and Skills Package, of which S$5.2 billion is to extend the Jobs Growth Initiative by seven months.
On foreign manpower, Mr Heng pledged to support the employment of Singaporeans, deepening their capabilities and promoting capability transfers, and moderate reliance on foreign labour where needed.
To that end, the Capability Transfer Scheme for foreign-to-local skills transfer is extended till end-September 2024, while the S Pass sub-dependency ratio ceiling in manufacturing will be lowered in 2022 and 2023.
Besides building a stronger workforce and economy, Mr Heng said, Budget 2021 aims to help Singapore emerge stronger as a society. It includes a S$900 million Household Support Package, with more help going to the lower-income. This will reduce financial burdens while encouraging retail spending, said Wong Xian Yang, Cushman & Wakefield associate director of research for Singapore and Southeast Asia.
But Adrian Sham, Grant Thornton Singapore partner for employer solutions, had hoped for more individual support, such as additional tax deductions for working from home.
For the even longer term, Budget 2021 features the continuation of sustainability efforts, with S$60 million for a new Agri-Food Cluster Transformation Fund and S$30 million for electric vehicle-related initiatives. To discourage the use of internal combustion engine cars, petrol duty rates were raised with immediate effect.
Taking the lead in green finance, the government will issue green bonds on select public infrastructure projects, with S$19 billion in such projects identified so far.
With fiscal prudence and discipline having allowed Singapore to accumulate the reserves needed to tackle the Covid-19 crisis, Mr Heng said that beyond this crisis, Singapore must "return to running balanced budgets".
He noted the goods and services tax (GST) increase slated for "some time during 2022 to 2025, and sooner rather than later", though the S$6 billion Assurance Package in last year's Budget will cushion the impact.
From Jan 1, 2023, GST will also be payable on low-value goods imported via air or post, such as those bought from overseas e-commerce sellers, and non-digital imported services.
This move will boost government revenue "without detracting from Singapore's attractiveness to inbound investment", said Allen Tan, principal and head of the tax, trade and wealth management practice at Baker McKenzie Wong & Leow.
The government also intends to borrow to fund major long-term infrastructure - having previously said that it was studying this - by issuing bonds under a proposed Significant Infrastructure Government Loan Act.
With enduring uncertainty from the ongoing Covid-19 pandemic, past reserves may play a continued role.
While the recent draws were for tackling an immediate crisis, the government is prepared to propose using past reserves to invest strategically in new growth areas as well, if needed.
"Based on the current outlook, we expect that as the economy recovers, we will be able to balance our budgets," said Mr Heng. But even if the outlook worsens and revenue cannot support projected expenditure, such investment must still go ahead.
If such a need arises, "the government will seek the President's consideration for the use of past reserves to support these economic investments to ensure Singapore emerges stronger from this crisis," he added.
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