Singapore markets closed

Singapore’s virus budget will challenge Hong Kong: Andy Mukherjee

People queue to buy protective masks at Mustafa Centre on February 8, 2020 in Singapore. (PHOTO: Suhaimi Abdullah/Getty Images)

By Andy Mukherjee

(Bloomberg Opinion) -- With more than two-score coronavirus infections and the threat raised to the second-highest level of severity, Singapore may not want to leave anything to chance when the budget is unveiled next week. The city-state is building an early reputation for handling the crisis professionally. Hong Kong, which is getting brickbats for ineptitude, will take note of its arch-rival’s fiscal defense. 

Finance Minister Heng Swee Keat will aim for a S$7.9 billion ($5.7 billion) deficit in the year starting April 1, the biggest in a decade, according to DBS Group Holdings Ltd., Singapore’s biggest bank. 

A stimulus this large is justified. Globalisation can turbocharge prosperity, but can also amplify shocks such as a subprime crisis in the U.S. or a viral outbreak in China. The Southeast Asian country’s small, open economy makes a living by facilitating flows of goods, money and people. It’s a transport hub and has trading links to China. As movement is disrupted, the epidemic will be costly, perhaps more so than during the Severe Acute Respiratory Syndrome crisis.

When SARS hit Singapore in early 2003, China, the origin of that outbreak and of the coronavirus, had been a member of the World Trade Organization for a little more than a year. The global electronics supply chain wasn’t as threatened as it is now by shutdowns and delays on the mainland. Much of today’s Singapore — the Universal Studios theme park, the indoor Gardens by the Bay, or the two casinos — didn’t exist back then. The city received 7.5 million visitors in 2002 compared with more than 17 million in the first 11 months of 2019. 

If Singapore could roll out a S$230 million package during SARS to help transport, retail, hospitality and food-and-beverage find their feet, the same industries — much larger now — will expect relief in Tuesday’s budget, after the tourism board projected a 25% to 30% drop in visitors this year. Since the 2008-09 financial crisis, there’s been an unwritten contract between the ruling People’s Action Party and voters that while the AAA-rated sovereign won’t pay healthy working-age people to stay home, it will open its purse-strings to keep unemployment, currently at 2.3%, in check. 

With general elections due any time between now and April next year, there was expectation that a chunk of the surpluses amassed by the current government would be spent to make voters feel good. (DBS expects that S$2.3 billion will be shaved from this year’s projected S$3.5 billion deficit, taking the total available kitty to S$17.9 billion.)

That priority must change. The new goal should be to ensure that Singaporeans don’t blame the PAP, which has ruled uninterrupted since before independence in 1965, for not doing enough to shelter their lives and livelihoods. 

So far, Singapore appears to have acquitted itself well even as Hong Kong gets a rap for shortages of everything from face masks and toilet paper to effective communication. But while the competing Asian financial centers occasionally profit from each other’s misery, there’s no scope for schadenfreude this time. For all its failings, Hong Kong had more than 33,000 hospital beds, excluding nursing homes, in 2018, while Singapore had fewer than 13,000. Hong Kong’s population of 7.5 million isn’t much larger than Singapore’s 5.7 million. The latter is boosting its healthcare capacity to prepare for an aging population. But it’s still a work in progress: Near-real-time bed-occupancy figures don’t suggest a great deal of slack.

Since elections in 2011, Singapore has managed public anger against overcrowding in housing estates and trains by curbing the numbers of foreign-born workers and their families, who still account for nearly 40% of the total population. If the outbreak takes a turn for the worse, voters are likely to ask, “Why are so many foreigners taking our hospital beds?” 

The fiscal bullets in the budget must hit three marks. First, healthcare spending earmarked for future years needs to be brought forward. Next, business and job losses will have to be mitigated with targeted handouts and tax relief. Finally, fiscal support for raising long-term competitiveness, especially for startups, should continue apace. 

At the end of February, Hong Kong will announce its own budget against a grimmer economic backdrop. Last year’s anti-government protests cratered the economy, while Singapore eked out some growth amid the U.S.-China trade spat. A second  year of decline will hurt Hong Kong, especially if the territory’s red-hot real estate — a crucial source of government revenue — loses its resilience. 

While it’s too early to know how bad the coronavirus will eventually get, the competition to do good between a laissez-faire Hong Kong and a more statist Singapore won’t be a bad thing for the people in either city. As they queue up for toilet paper or worry if their jobs will survive, Hong Kongers will be rooting for a generous Singapore budget.


© 2020 Bloomberg L.P.