Budget for uncertain future on the cards: UOB

Focus likely to be on healthcare, education needs and mitigating coronavirus impact

The Budget this year is expected to be an expansionary one, addressing issues such as rising needs in healthcare and education while steering Singapore through a global landscape fraught with uncertainty.

It may also have a fund to help sectors that have been more heavily impacted by the coronavirus outbreak, which originated in Wuhan at the end of last year, said United Overseas Bank (UOB) economist Barnabas Gan.

Mr Gan said: "The Budget for the 2020 financial year is to be announced in a time of unprecedented global retreat from multilateralism, and amid ongoing geopolitical tensions and global economic uncertainties. There is also a need to keep a close watch on more immediate risks and pressures, to manage revenue and spending effectively, and most importantly, to plan for the country's future."

He added that policymakers are also likely to introduce some measures to deal with the impact of the coronavirus situation.

UOB will be holding a post-Budget discussion with The Straits Times next Wednesday - the day after the Budget speech is delivered. A panel of experts will discuss measures announced in the speech.

Last Thursday, Ms Indranee Rajah, Minister in the Prime Minister's Office and Second Minister for Finance and Education, said measures will also be put in place to help businesses and Singaporeans tide over this difficult period, with the economic fallout from the coronavirus.

Said Mr Gan: "We believe there could be some mention of an 'anti-epidemic' fund to be introduced to pre-emptively stem a potential slump in Singapore's tourism sector.

"The sectors that may see the most direct impact are likely to be tourism and its related industries such as transport, food and beverage, entertainment, and retail trade. The measures could also include the lowering of foreign worker levies and bridging loans, to reduce business costs and alleviate cash flow issues."

During the severe acute respiratory syndrome outbreak in 2003, the Government released an off-Budget relief package, announced in April 2003, totalling $230 million. It consisted of measures to help affected industries, including property tax rebates for hotels and commercial properties, fee rebates for airlines and cruise operators, and diesel tax rebates for taxis.

Mr Gan said: "Based on the estimated first-order impact on tourism-related activities, the coronavirus is expected to negatively impact Singapore's economic growth by between 0.5 percentage point and 1 percentage point - depending on the severity of the outbreak - thus putting our 2020 growth outlook of 1.5 per cent at a material downside risk."

But Singapore does have ample ammunition to introduce a substantial stimulus package, if needed, to boost the economy.

ROOM FOR MANOEUVRE

Should our estimates for a more moderate deficit come to pass, Singapore will have clocked a total of $16.3 billion of surplus in the last four years, suggesting a comfortably large fiscal space for the upcoming Budget.

UOB ECONOMIST BARNABAS GAN, on how the Government is in a good position to provide a substantial stimulus package, should the need arise.

Said Mr Gan: "Should our estimates for a more moderate deficit come to pass, Singapore will have clocked a total of $16.3 billion of surplus in the last four years, suggesting a comfortably large fiscal space for the upcoming Budget."

He added that the upcoming Budget will also be a powerful tool for the Government to steer Singapore through uncharted waters. It will help build Singapore's competitiveness and competencies, aiding workers to thrive in times of uncertainties, and strengthening social safety nets, especially for the poor, elderly and vulnerable, he said.

It will also help position Singapore as a green economy and reinforce defence capabilities, particularly in times of ever-evolving threats, added Mr Gan.

He said measures could range from enhancing research and development incentives across the corporate sector to giving details of a goods and services tax support package ahead of the GST rate increase some time between next year and 2025, together with green efforts to reduce wastage.