Asked on 26 Mar 2020
What are your thoughts?
The Resilience Budget worth S$48 billion is indeed a massive one, and I believe that there are multiple factors have led to this.
Singapore's Current Economy
First and foremost, the government has to respond drastically to the current economic situation in Singapore.
Economic data released on Thursday morning showed how Singapore's gross domestic product fell an annualized 10.6% in the first quarter from the previous three months, with our economy shrinking 2.2% in the first quarter of this year. The country is expected to be heading for a full-year recession- its first in two decades. The Ministry of Trade and Industry downgraded its 2020 growth forecast to a range of -4 to -1 per cent. All this does not bode well for Singapore's economy, and it's imperative that the government provides support for businesses and Singapore's citizens.
I believe that the government has learnt its lesson from the Global Financial Crisis of 2008, whereby Singapore ended up becoming the first East Asian Country to slip into a recession. It was only after the government sought permission for the President to dip into our national reserves in 2009 -$4.9 billion; that Singapore's economy began to slowly recover. It was this act that helped to significantly cushion the effects of the recession, and sparked the slow but sure recovery of Singapore's economy. Ultimately, Singapore was ranked as the world’s fourth most dynamic city post-recession in the 2010 Global Metro Monitor Report, which was commissioned by the Brookings Institution's Metropolitan Policy Program, and provided an overview of the recent economic performance of 150 global metropolitan cities post the Great Recession. Hence, I believe that the government understands the need for drastic action, and want to try and cushion the economic effects of the pandemic as soon as possible.
As you mentioned, I believe that the upcoming elections are a factor that has made the response from the government this drastic. Just yesterday, Teo Chee Hean said in parliament that delaying elections and having the president form a caretaker government are both “unconstitutionally unworkable” proposals- it seems that the PAP is determined to go ahead with the elections. This could be due to them seeing the Covid-19 pandemic as an opportunity to further their credibility as our lawmakers, and as an opportunity to win the younger generations over- the Gen Zs who are coming of age. This is a double-edged sword in my opinion, but I personally think that the government's responses have been more than decent, from the containment of the disease to their efforts to reduce the strain on the economy. We shall see if this continues to be the trend, but so far I think they've done well in the handling of the current situation.
Do let me know if you agree or disagree with my views!
This is indeed a MASSIVE Supplementary Budget that the Government has given, drawing up to $17 billion from the country’s past reserves to fund part of this $48 billion Resilience Budget.
This is the biggest draw on the country’s reserves yet and only the second time the Government has done so. The Government drew $4.9 billion during the financial crisis in order to help workers keep their jobs and for companies to get credit.
There is a need for such a huge second stimulus package because the impacts of Covid-19 is far more severe than any other crisis we’ve faced since our independence. Covid-19 will also cause Singapore to face its worst economic contraction to date.
Like what DPM Heng said, Covid-19 is an “unprecedented crisis of a highly complex nature”.
Given the severity of Covid-19’s impacts on our economy, businesses and workers, there is therefore an urgent need to come up with a package that will
Save jobs, support workers and protect livelihoods
Help enterprise overcome immediate challenges
Strengthen economic and social resilience
While I am not exactly pro PAP, apart from scoring points for elections, I would go from macro-econs pov:
A. the whole economy is linked up, weak parts in the link will send ripple effect to others.
If airline industry down and cut their employees,
then the banks will have to write off their loans to airlines, maybe those employees also no income to pay their loans
the business that provide service to airlines will not be able to collect their earnings, they may also end up having to cut their employees to have enough cash flow for survival
Expand this cycle many many times for the different industries that have less business during this time. The domino impact (especially if full lock down) will be devastating.
B. Too much unemployment (from closure of business) is not good for society. Too many people fighting for same pool of jobs only lowers the wage and income earned for those jobs. Apart from financial stress seen in society, you will see increase in crime rates, family violence, divorce cases, suicides, bankruptcies. The package will dent the overall impact.
C. From first two points will corresponding affect the attractiveness of our country as a hub for businesses and regional hq. Apart from tax rates, it is really the good quality of life, pricing and availability of goods and services, low crime rate, good education system that attracts the foreign companies.
Points A, B and C are all related and reinforce each other for better or worse. The economic damage of the virus might not be as little as you think.
I already hear of many startups having to lay off folks.