Fortitude Budget could help to deal with expected rise in retrenchments: MOM official

SINGAPORE could roll out the fiscal big guns to save workers later on Tuesday, amid a souring manpower outlook, as officials gird their loins for higher unemployment.

The objective of policymakers is "to make sure that the labour market remains relatively healthy", Permanent Secretary for Trade and Industry Gabriel Lim told reporters at a morning briefing.

To that end, some help is expected from the so-called "Fortitude Budget", which Deputy Prime Minister Heng Swee Keat is due to unveil at 3.30pm. Mr Heng, who is also the Finance Minister, has said that this latest fiscal package will create jobs and training opportunities.

Said Mr Lim: "We have seen the experience in other countries, where you have seen unemployment spike in a very big way and we are ourselves on guard, on high alert for that, and we want to make sure we are supporting our companies and our workers every which way possible."

Though he did not give examples, unemployment has surged in the world's two largest economies on the back of the novel coronavirus pandemic and virus containment measures.

The United States jobless rate jumped to 14.7 per cent in April. China posted unemployment of 6 per cent, "but many analysts say true unemployment must be far higher", Reuters reported.

Meanwhile, Singapore's overall unemployment inched up to 2.4 per cent as at end-March, from 2.3 per cent at end-2019, while retrenchments hit 3,000, from 2,670 in the quarter before.

OCBC Bank chief economist Selena Ling wrote in a morning note that domestic risks to the economy now include "the expected deterioration in labour market conditions, which is clearly going to see a further fallout in the months to come as the fiscal assistance programmes fade with time, hence the potential need for continued support to tide this challenging period over".

Despite economic support measures such as the Jobs Support Scheme's wage subsidies, Singapore must be prepared for a rise in retrenchments, Terence Ho, director of the Manpower Ministry's (MOM) manpower planning and policy division, said at the latest briefing.

"We have seen that the Budget support measures announced so far have cushioned the impact of Covid-19 on the labour market, but from the second quarter, we do expect that the labour market conditions will deteriorate and we have to be prepared for a rise in retrenchments.

"Much of it will depend on the pace of opening up of businesses, not just in Singapore but around the world. There is considerable uncertainty… so what we must do is be prepared to deal with any rise in unemployment and retrenchments, and we'll hear more about it in the Budget statement this afternoon."

United Overseas Bank economist Barnabas Gan suggested in a note that the Budget could extend the duration of both the Jobs Support Scheme and foreign levy waivers, "in a bid to reduce firm cost, and relieve the pressures on their cash flow".

Calling Singapore's fiscal and monetary approach "very prudent and also very responsible", Mr Lim added: "The way we have sized up our support measures so far has followed that trajectory. We will help, but we will do so responsibly… We have had a track record of prudence, deservedly so, and I think we will continue to stick to that for the long term."

Barclays economist Brian Tan predicted that the Fortitude Budget will involve S$5 billion to S$7.5 billion in fiscal support, or between 1 per cent and 1.5 per cent of gross domestic product.

He noted that this boost ought to "provide a sizeable offset to the economic downturn", adding that his base case is for the central bank to stand pat on monetary policy in October.