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Government may unveil $700m virus relief package during Budget 2020: Maybank Kim Eng economists

Janet Ong
Finance Editor
People wearing protective facemasks wait at a pedestrian crossing in Singapore on February 4, 2020. (PHOTO: Roslan Rahma/AFP via Getty Images)

SINGAPORE — The government may unveil a virus relief package of at least S$700 million during Budget 2020 as part of measures to help businesses adversely affected by the outbreak, Maybank Kim Eng’s economists said.

The government would target assistance to sectors reeling from the impact of the outbreak, according to a report from economists Chua Hak Bin and Lee Ju Ye released on Wednesday (5 February).

Among the measures in the package that the economists predicted are property tax rebates for the commercial, retail and hotel sectors, lower foreign worker levies for tourism-related sectors, reliefs for aviation and taxi operators, and bridging loans for small- and medium-sized enterprises (SMEs).

In percentage of GDP terms, the size of the package is comparable with the S$230 million Severe Acute Respiratory Syndrome (SARS) relief package in 2003, the report showed.

Deputy Prime Minister and Finance Minster Heng Swee Keat will announce the Budget measures on 18 February. The Budget comes at a time when Singapore’s economic growth slowed to its lowest level in a decade to 0.7 per cent in 2019 from 3.1 per cent in 2018.

The Maybank Kim Eng economists said the tourism-specific measures could target training for workers, and property tax rebates for commercial properties, retail and hotel businesses.

One area that the package could assist businesses is the dependency ratio ceilings for foreign workers, which have been tightened for the services sector since 1 January 2020.

“We think the government should fine-tune the tightening of stricter dependency ratio ceilings scheduled for January 2021 in the services sectors, given the severity of this shock (from the outbreak),” Chua and Lee said.

The government could also tweak the levy rates for services work pass holders, they added.

For the fiscal 2020 Budget, the economists expect the deficit to widen to 1.5 per cent to 2 per cent of GDP, with higher spending on healthcare, infrastructure, training and special transfers.

The government could also unveil details of a Goods and Services Tax (GST) offset package ahead of the planned increase of two percentage points in the GST some time in the period from 2021 to 2025. The economists are expecting a GST offset package of around S$7 billion, likely to be spread over five years to help offset the costs for households with “generous support” expected for lower income households.

The last GST offset package of S$4 billion was in 2007, when the government raised the rate to 7 per cent from 5 per cent.

The economists also lowered its 2020 GDP growth forecast for Singapore to 1.1 per cent from 1.8 per cent as the virus outbreak and border control measures will hurt the hospitality, travel and retail sectors. Similarly, the manufacturing sector would feel the impact of disruptions to China’s supply chain.

Manufacturing and exports are expected to recover only in the middle of the year, they said.

The Monetary Authority of Singapore (MAS) on Wednesday said that while its monetary policy stance is unchanged, there is enough room within its policy band to accommodate an easing in the Singapore dollar exchange rate due to weaker economic conditions arising from the outbreak.

“We are not expecting a technical recession and do not expect the MAS to ease the slight appreciation stance at the April meeting,” Lee and Chua said.

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