'Restructuring and reopening' . . .
The Singaporean government has allocated C$10.5 billion of its 2021 budget to the COVID-19 Resilience Package. Finance Minister Heng Swee Keat announced Tuesday that the budget represents a shift from “containment to restructuring,” suggesting a focus this year on reopening Singapore’s economy. The budget expands on previous measures supporting local businesses, families, and workers through initiatives such as the Job Support Scheme that subsidizes sectors that have suffered due to the pandemic and the Household Support Package. Sustainable growth and digitalization have also been prioritized, with increases in targets for electric vehicle charging points and the adoption of AI and 5G technologies.
An unusual deficit . . .
The 2020 recession is the worst Singapore has experienced since it achieved independence in 1965. At the height of the pandemic, Singapore’s unemployment rate reached 4.38 per cent and its GDP per capita contracted by 5.8 per cent. The stimulus proposed in the 2021 budget will likely support a return to normalcy, but it has also forced the government, elected in July 2020, to record a deficit in the first year of its five-year term. By constitutional law, the Singaporean government must ensure that its revenues and expenditures are balanced by the end of its term. To achieve this balance, the government traditionally accumulates a surplus in the first few years and then runs a deficit as the election nears. The new government will need to ensure the economy bounces back quickly to generate that surplus offset.
Opportunities limited for international investment . . .
While Singapore is attempting to expand its role on the international stage, most recently through its decision to host the 2021 World Economic Forum, the 2021 budget does not appear to encourage foreign investment. The government has provided tax incentives to encourage Singaporean businesses to expand overseas, but no tax incentives have been offered for foreign companies to expand their activities in Singapore. And the new pandemic-related schemes focus on spurring the economy through increases in domestic employment and consumption rather than international investment. Meanwhile, the government has continued to tighten foreign workforce policies, particularly in the manufacturing sector. Ultimately, there may be limited foreign investment opportunities as Singapore charts its economic rebound.
- Channel News Asia: What you need to know about budget 2021
- PwC: Singapore budget 2021 commentary
- South China Morning Post: What Heng Swee Keat’s 2021 Singapore budget has in store for the city state’s coronavirus recovery