In the midst of the Covid-19 outbreak impact, Singapore’s budget offers a “fairly large boost” to the economy to combat such impacts, even as the government expects positive growth for 2020, Deputy Prime Minister Heng Swee Keat remarked.
Authorities must be prepared for the likelihood that recession occurs and that the country’s growth outlook may have its “upsides as well as downsides”, Mr Heng told Bloomberg on Wednesday (19 Feb).
“Our central scenario is still that we will have some positive growth this year,” he said. “It all depends on what happens to the global economy in the coming months and that, in turn, depends on how far the virus outbreak spreads and how severe it is,” Mr Heng remarked.
This week, Singapore’s growth projection for 2020 has been revised downwards to between -0.5 per cent to 1.5 per cent as trade and tourism take a toll from the Covid-19 outbreak. The country has reported more than 80 cases of infection. In an effort to boost the economy, Budget 2020 has been unveiled by Mr Heng on Tuesday (18 Feb) with S$6.4 billion stimulus package to combat the virus’ impact. Fiscal deficit may reach the highest since 1997.
In the Bloomberg interview, Mr Heng commented that the growth revision did not consider the stimulus package announced in the budget and the potential stimulating effect on the economy. Both fiscal and monetary policies are utilized to boost the economy, he added.
On Wednesday (5 Feb), the Monetary Authority of Singapore (MAS) stated that it utilised the exchange rate as a main policy tool seeing that there was still room in the exchange-rate range to allow some weakening in the currency to mitigate the contractionary effect of the viral outbreak.
MAS is slated to convene in April to decide on the next policy.
Mr Heng noted that “the government has been very prudent in the first few years of our term and I have enough firepower to deal with this for now.” China is also decisively managing the outbreak and the stimulus spendings to support its economy are “positive”.
“It is because of our fiscal prudence that we have this large reserves that we could use in this current term of government. And at the same time, we also have our past reserves if we ever had to call on it, but in which case we would need the approval of the president… But for now, the government has been very prudent in the first few years of our term and I have enough firepower to deal with this for now.” Mr Heng stressed.
Mr Heng said that abolishing additional buyer’s stamp duty for the property market is “not on our radar at this point” because the priorities now are to “stabilise the economy and address long-term structural issues.”
Regarding these long-term structural issues, Mr Heng elaborated that “long-term structural issues will be first, technology and innovation. This is going to power growth in the next phase. Not just for Singapore but for the global economy. And we want to make sure that we are in that…Very importantly, I would like Singapore to be a global Asian node of technology innovation and enterprise.”