Singapore Budget 2020

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On 18 February 2020, against the backdrop of uncertain times and the COVID-19 outbreak, Deputy Prime Minister and Minister for Finance, Mr. Heng Swee Keat, delivered his fifth Budget speech.

While there are special measures to help businesses and individuals tide over these trying times, the Government remains laser-focused on gearing its economy and preparing the people for the future.

Stabilisation and support

Singapore’s economy grew by 0.7% in 2019.  This is the weakest growth since the 2008 Financial Crisis. COVID-19 has further threatened Singapore’s slow economy, with aviation, tourism, hospitality, F&B and retail industries taking the biggest hit.

The Stabilisation and Support Package of S$4b provides necessary short-term support to businesses to improve their cashflow position and to keep local workers in employment. Under the Jobs Support Scheme, employers will receive a generous 8% cash grant on the gross monthly wages of each local employee for three months, subject to a monthly wage cap of S$3,600 per employee. The existing Wage Credit Scheme has also been enhanced. These measures will help defray wage costs and co-fund wage increases.

SMEs play an important role in Singapore’s economy, employing about 72% of its workforce and contributing 48% of GDP. According to the World Bank Group, the lack of access to finance is a key constraint to SME growth. The Government will raise the maximum loan quantum from S$300,000 to S$600,000, and enhance its risk-share to up to 80% (from the current 50% to 70%) for one year until March 2021 for SMEs that borrow under the Enterprise Financing Scheme – SME Working Capital Loan.

Transformation and growth

This year’s Budget is targeted at helping SMEs and Singaporeans ride the wave of technology disruption and stay relevant.

It is Singapore’s vision to be a Global-Asia node of technology, innovation and enterprise. A sum of S$8.3b over the next three years has been allocated to three key thrusts, namely (a) enabling stronger partnerships with the world and within Singapore, (b) deepening enterprise capabilities and (c) developing people, to drive the Transformation and Growth strategy.

Singapore has a thriving startup ecosystem. Startups play an increasing role in driving innovation, bringing new ideas and solutions to the world. Additional government funding of S$300m has been set aside under the Startup SG Equity to catalyse investment into deep-tech startups in areas such as pharmbio and medtech, advanced manufacturing and agri-food tech.

SMEs can expect enhanced support to internationalise or embark on their digitalisation journey. A new Enterprise Transform Package has been introduced with a focus to strengthen local enterprises’ leadership and management capabilities.

In relation to developing the Singapore workforce, various programmes have been introduced or enhanced to support reskilling, upskilling, lifelong learning and employability.

Addressing climate change

It is heartening to note that long-term sustainability has a place in Budget 2020. Singapore is committing close to S$1b to develop new innovative solutions in the areas of renewable energy, temperature control and carbon capture, amongst others.

Incentives, tax structures and regulations will be put in place to manage greenhouse gas emissions, including enhanced incentives and revision to vehicular tax structure i.e., excise duties and road tax to encourage the adoption of cleaner and more environmentally friendly vehicles. The Government will expand the public charging infrastructure for electric vehicles and take the lead to progressively procure and use cleaner vehicles.

A new Coastal and Flood Protection Fund, with an initial injection of S$5b, will be set up to deal with climate change and rising sea level.

Conclusion

Budget 2020 is an expansionary budget. The expected budget deficit at S$10.9b is much larger than that we have seen in recent years. It is comforting to note that the fiscal discipline maintained by the Government has allowed Singapore to fund emergency measures and continue its investments for the future, without dipping into past reserves. No GST hike is announced for now but it is a matter of time, as the nation seeks to match recurring revenue against increase in recurring expenditure, especially in  public health care costs.

Read our Budget 2020 Synopsis here

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