Singapore Budget 2021: 6 things to look out for

SINGAPORE - This year's Budget will be unveiled on Tuesday (Feb 16) as Singapore continues to tackle the Covid-19 pandemic and its economic fallout.

Deputy Prime Minister and Finance Minister Heng Swee Keat has said that helping workers and firms adapt, innovate and grow will be a key priority for Budget 2021 - his sixth Budget speech.

The Government will also continue to support workers and businesses, especially those in hard-hit sectors, he said.

Last year, the Government set aside a war chest of almost $100 billion - or nearly 20 per cent of gross domestic product (GDP) - to cope with the pandemic, with most of the funds used to support businesses and help workers keep their jobs.

Here are six things to look out for on Tuesday, as The Straits Times brings you live coverage of this year's announcements as they are delivered in Parliament from 3pm.

1. More targeted support

This year's Budget is expected to target sectors hit hardest by the pandemic, but overall spending will be reined in after extensive support measures were rolled out last year.

Mr Liang Eng Hwa, chairman of the Government Parliamentary Committee for Finance, Trade and Industry, told a pre-Budget round-table last month: "I expect this Budget to be a lot more targeted and differentiated than before, so we really channel and allocate funds to those businesses that need help, grow the economy and create jobs...

"We'll still have to help, but the numbers will taper off along the way."

Prime Minister Lee Hsien Loong said last week that the bulk of Singapore's economy should be able to bounce back this year, following the heavy hits it took last year with the Covid-19 pandemic.

Such a rebound will, however, be uneven, and PM Lee cautioned that sectors like tourism, transport, aviation and construction will take longer to recover.

ALSO READ: What Heng Swee Keat's Budget 2021 has in store for Singapore's coronavirus recovery

2. Alternative ways to raise revenue?

The country last year drew up to $52 billion from past reserves to fund its support measures and incurred a deficit of $74.2 billion - its biggest since independence in 1965.

Economists forecast a more modest deficit this financial year, ranging from about 2 per cent to 4 per cent of GDP, compared with more than 15 per cent in the last financial year.

PM Lee said in a Bloomberg interview last November that it may take some time for Singapore to return to "prudence and balanced budgets".

"You must keep the economy on an even keel and people as far as possible in jobs, or if not in jobs, some help is rendered so that they are able to get past this difficult period," he said then.

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While observers say an expansionary Budget is still much needed, some think it may not be necessary to touch the reserves. Experts say the Government can consider borrowing to fund some of its current expenditure, given the low interest rate environment.

Based on the strong global stock market performance, the contributions from investing Singapore's reserves may also rise this year, meaning that the Net Investment Returns Contribution, already the largest component of revenue, may grow.

There is also the traditional way of raising revenue through taxes.

3. Extension of Jobs Support Scheme?

Generous wage subsidies under the Jobs Support Scheme (JSS) will end next month, with the last payout scheduled for June.

The $26.9 billion JSS is widely seen as being the biggest lifeline for businesses and workers amid the pandemic. It covered between 25 per cent and 75 per cent of the first $4,600 of gross monthly wages for all local employees for 10 months till August last year.

It is now providing between 10 per cent and 50 per cent wage support in most sectors until next month.

Sectors deemed to be doing better, such as precision engineering and financial services, lost their subsidies after December.

The employment of Singaporeans and permanent residents has been boosted by other initiatives such as the SGUnited Jobs and Skills Package, under which about 75,000 people had found jobs, traineeships, attachments or training places as at Dec 31.

The $1 billion Jobs Growth Incentive has been useful as well.

While the labour market improved towards the end of last year, observers noted that economic recovery is uneven across sectors and retrenchments are expected to continue. This might lead to a rise in unemployment again, they said.

Some have suggested an extension of the Jobs Growth Incentive to encourage employers to bring forward their hiring as part of a suite of measures that would be needed to reduce unemployment this year.

Others say measures like the JSS are broad-brushed and financially costly, and incentives to help firms with training and retraining Singaporeans may be enhanced instead.

4. Stronger social safety nets

The pandemic has hit low-income workers the hardest and any plan to strengthen the social safety nets has to involve improving their wages and employment conditions.

Many of the low-wage workers are in essential services like cleaning and transport, or are employed in the gig economy, experts noted.

The Progressive Wage Model (PWM) currently covers the security, cleaning and landscaping industries. It will soon also take effect in the lifts and escalator maintenance sector, and in waste management.

Introduced in 2012, the PWM sets out minimum salaries for local workers in various roles along a career and skills progression framework.

When it comes to raising the wages of low-income workers, Singapore Management University law don Eugene Tan feels that Singapore cannot just wait for the PWM to be rolled out to all the different sectors.

He previously told The Straits Times: "Even if the pace is quickened, the Progressive Wage Model is a sector-by-sector approach that will take many years before all low-wage workers can benefit from it.

"The pandemic has shown the urgency and the heightened imperative to do more and to do so sooner."

The number of applications for two key government financial aid schemes jumped by 26 per cent last year as Singapore was gripped by the Covid-19 pandemic.

About 83,000 applications were received for the ComCare Short-To-Medium Term Assistance Scheme and the ComCare Long-Term Assistance Scheme last year, up from about 66,000 in 2019, said a spokesman for the Ministry of Social and Family Development.

The Community Care Endowment Fund is a key social safety net for lower-income families.

5. Property cooling measures?

Singapore’s property market has defied the pandemic-induced recession, leading to talk of another round of cooling measures, intensified by recent ministerial remarks.

Prices of non-landed condominiums and private apartments grew 2.5 per cent last year while Housing Board resale prices jumped 5 per cent - the steepest growth since 2012 - with more million-dollar flats sold.

Latest data out on Monday showed monthly new home sales rising to their highest in more than two years in January, and the most since the last round of cooling measures were imposed in July 2018. 

Deputy Prime Minister and Finance Minister Heng Swee Keat said in January that the Government is paying “close attention” to the local real estate market “to ensure that it remains stable”.

As the economic outlook remains very uncertain, he added that “we do not want to see the property market run ahead of the underlying economic fundamentals.” 

Mr Heng’s comments at the Real Estate Developers’ Association of Singapore (Redas) came hours after National Development Minister Desmond Lee said at a BCA-Redas seminar that the Government is monitoring the property market “very closely”. 

Mr Lee had urged developers to remain prudent in their land bidding, and households to exercise caution when purchasing property, given the uncertain economic outlook.

Observers said cooling measures could include further loan curbs for investors and a tweak in additional buyer stamp duties for investors and foreigners. Other suggestions include tightened mortgage terms and an increase in the average minimum home size for new developments.

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6. Support to go green

In February, Singapore unveiled a slew of sustainability initiatives to change the way people work, study and play.

The Singapore Green Plan 2030, which was released by five ministries, will help chart the country's way towards a more sustainable future over the next decade.

The wide-ranging plan cuts across all sectors of society, ranging from infrastructural development and research and innovation to training programmes.

The five ministries backing the plan are the ministries of Education, National Development, Sustainability and the Environment, Trade and Industry, and Transport.

Under the Green Plan, at least 20 per cent of schools here will be carbon-neutral by 2030. Adults, too, will work in greener buildings, among other initiatives.

More details on the Green Plan will be given during the Budget, and in the subsequent Budget debates, said the ministries.

This article was first published in The Straits Times.