Klareco Insights – Singapore Budget 2020 Speech
The COVID-19 outbreak took centre-stage at the delivery of the Singapore Budget 2020 Speech on 18 February. Deputy Prime Minister and Finance Minister Heng Swee Keat indicated, prior to his speech, that #SGBudget2020 will include “measures that were not on the table one month ago”. These measures reflected a swift and decisive response by the Singapore Government to address the economic impact brought about by the global spread of the virus.
Set against the backdrop of global trade tensions and the warnings of a potential recession in Singapore, these immediate measures were much needed to stem poor business sentiments and anxiety among workers, even as Budget 2020 was positioned as a strategic financial plan to prepare Singapore and Singaporeans to meet global challenges brought about by technological disruption and seize new opportunities.
As widely anticipated, it was announced that the Goods and Services Tax (GST) would remain at 7 per cent this year. However, the Finance Minister said, this could not be put off indefinitely. With the COVID-19 outbreak and additional investment in the healthcare system, Singapore would need recurrent sources of revenue to fund spending needs in the medium term.
The COVID-19 response measures included a comprehensive S$5.6 billion package for both citizens and businesses. This substantive package dwarfs the S$230 million package during the SARS crisis in 2003.
In addition, the Finance Minister identified five key sectors directly affected by the spread of COVID-19 that would receive additional support: tourism, aviation, retail, food services, and point-to-point transport services.
These immediate measures were tailored to help the most impacted sectors manage operating costs and cash flow in the short term and minimise potential job losses. By taking a longer view and providing incentives for employers in these sectors to train, reskill and redeploy their workers, the Government was also cognisant to align the response measures to the longer-term objectives of Budget 2020.
Strategic Plan for the Future
From a longer-term perspective, the Finance Minister also highlighted four accelerating structural shifts that would affect Singapore, including: a decline in support for globalisation; the shift in global economic weight towards Asia; rapid advancement of technology, and more recently, the risk of a technologically bifurcated world; and Singapore’s transition to an ageing society. These presented both challenges and opportunities.
To address these, Budget 2020 laid out the following key objectives:
– First, to grow our economy, transform our enterprises, to create opportunities for our people.
– Second, to care for and nurture Singaporeans at every stage of their lives, to build a caring and inclusive society, where no one is left behind.
– Third, to build a liveable and sustainable Singapore in the face of climate change, secure our sovereignty as an independent nation, and ensure our fiscal sustainability.
– Fourth, to mobilise Singaporeans to work together in this journey, to build a nation and a home we will always call our own.
Against these shifts and broader objectives, themes of note from Budget 2020 included:
- A strong and sustained push for reskilling and upskilling workers, with a specific focus on middle-aged and senior workers;
- Sustained efforts to drive innovation and digitalisation, by facilitating the growth of start-ups and a vibrant innovation ecosystem, and emerging sectors such as biomedical, Artificial Intelligence, and cyber and data security;
- Continued support for local firms to transform; and
- Forward planning to address social and environmental challenges and threats, through spending on education, supporting seniors, and climate change.
Notable highlights and announcements include:
- Expansion of SkillsFuture benefits for both workers and employers to help employees, particularly middle-aged and older workers, embark on lifelong learning and continuously reskill and upskill;
- The injection of an additional S$300 million in the Startup SG Equity Scheme for the Government to co-invest in deeptech start-ups with private investors;
- The commitment of S$1billion to build up the Government’s cyber and data security capabilities over the next three years, building on strategic, long-term efforts by the Government to strengthen cybersecurity and data protection, most recently the completion of the public sector data security review;
- A commitment to phase out internal combustion engine (ICE) vehicles by 2040; and
- An initial investment of S$5 billion in a new Coastal and Flood Protection fund to protect Singapore from rising sea levels.
Budget 2020 was, in a nutshell, an extraordinary budget for extraordinary times, going way beyond what would have been an “elections budget” as earlier characterised by pundits. Amidst heightened anxieties, compounded by the global spread of COVID-19, Budget 2020 was a generous and comprehensive one that addressed both immediate concerns as well as longer term needs to support enterprises to transform and workers to reskill and upskill. Many of the initiatives announced addressed the calls from industries – an indication that the Government has taken the feedback from the private sector on board. With S$8.3 billion to be allocated over the next three years for transformation and growth, the Government also sent a strong signal that industry should set its sights on longer term objectives, even as they hunker down for short term challenges.