FEBRUARY 23 — Covid-19 is doing real damage to our economy. Given the already tough conditions as a result of US-China trade tensions, the last few months in Singapore have seen a slew of bad news.
Falling growth forecasts, a falling currency and falling stock markets but last week the government hit back with Budget 2020.
Deputy Prime Minister Heng Swee Keat gave a marathon two hour plus budget speech laying out how the government will use its spending and policy power to bolster the economy and support Singaporeans.
In many ways, this budget is extraordinary. Acknowledging the scale of the challenge the economy faces, the Singapore government has increased spending to near unprecedented levels.
This year the government will dispense S$109 billion (RM326 billion), with a large proportion taking the the form of direct support to Singapore businesses, workers and SMEs.
Highlights include direct (one off) cash payments to citizens; S$100, S$200, S$300 depending on your income status.
Income support for companies will see the government covering eight per cent of the salaries of local workers for a three-month period.
Tax rebates on corporate tax will see businesses receiving up to S$15,000 in payments.
Loan facilities for SMEs have been extended with the government guaranteeing increased loans for smaller businesses.
Across the board, there have been increases in support for citizens. Vulnerable older citizens will receive larger quarterly pay-outs under the silver support scheme while students will see increases in bursaries.
Skills credits have been extended, allowing more people to spend more time on training and acquiring new skills.
To realise this level of support, the government will run up the highest budget deficit in its history at spending S$10 billion more than it received in revenues last year.
Though a two per cent budget deficit is modest by world standards, by the standards of the financially conservative Singapore government it's an earthquake.
But again policy makers argue that years of prudence have allowed them to spend in a time of potential difficulty.
This is arguably the most generous budget in Singapore's history — more spending and virtually no tax increases. The government is literally putting money in the pockets of citizens (of course this is our own tax money etc) but still.
Of course the government very likely has an eye on potential elections this year. But there is more to this year's budget than simply politics.
The support for SME businesses and wage credits show a real commitment to workers, as does the emphasis on life-long learning.
There has also been acute policy movement in the field of renewable energy with the government announcing it would seek to phase out petrol- and diesel-based vehicles by 2040.
Previously the Singapore government was something of a laggard in terms of battling fossil fuel dependence but no longer it seems.
Fundamentally, it seems the government has responded to tough times with far-reaching measures. But there are many unknowns. Will this be enough? How deep will the damage from Covid-19 be?
And with the government supporting so many businesses directly, how do we prevent companies from becoming state dependent?
With more and more direct pay-outs to citizens and companies, it appears we are creeping towards a welfare state... something our policy makers have long said they would not do.
But given the fragile nature of the world economy, it looks like government intervention is needed at this time — but can the government help without fostering a culture of dependence?
We are about to find out.
* This is the personal opinion of the columnist.