Singapore Budget 2021 : How Gov’t Plans to Recover From Economic Hurdles Due to Covid-19

Singapore will dig deep into its pockets as part of its “emerging stronger together” plan to overturn the economic recession brought by the health crisis, allocating S$11 billion to its COVID-19 stimulus plan to support people and businesses as the country moves towards a post-pandemic world.

Summary of Singapore budget 2021

In his budget debate round-up statement, Deputy Prime Minister and Minister for Finance Heng Swee Keat said this means Singapore would be using a total of S$53.7 billion from their reserves in just two years – for the Singapore budget 2020 and budget 2021, to “respond decisively to the COVID-19 crisis”.

Deputy Prime Minister Heng Swee Keat added in his statement that using more reserves for the budget measures will provide the Singaporean society a sense of security and confidence that the pandemic can be solved, and that economic progress would follow.

This would fund the COVID-19 stimulus in the Singapore budget 2021, but the total amount that would be obtained from reserves and will be used for the budget is only at S$53.7 billion because the funds sourced for the Singapore budget 2020 were not fully utilized.

“Our reserves give us the confidence to forge forward, knowing that we have the wherewithal to deal with any crisis that might come our way,” Deputy Prime Minister Heng Swee Keat, who is also Singapore minister for Finance, said in his budget statement before the parliament and the government of Singapore last February 16.

He also assured Singaporeans that the government is not relying heavily on these measures for its budget 2021, asserting that it is necessary to kickstart the economy.

“Some commentators have questioned if we are dipping into the Past Reserves too readily. And yet, there are others who downplay the use of reserves, saying that these are small amounts and we can afford to use more of our reserves by spending more through the NIRC (Net Investment Returns Contribution),” Deputy Prime Minister Heng Swee Keat relayed in his budget statement.

“Let me reiterate that the Government does not take any decision on the use of reserves lightly. Our reserves serve three important roles: First, they serve as an endowment fund, providing a key stream of revenue to supplement our annual Budget through the NIRC. Second, they provide a buffer against shocks and attacks on our financial system,” Deputy Prime Minister Heng Swee Keat explained to the parliament.

Highlights: 

• Singapore would be using a total of S$53.7 billion from their reserves to “respond decisively to the COVID-19 crisis”.

• The total amount that will be used for the budget is only at S$53.7 billion because the funds sourced for the Singapore budget 2020 were not fully utilized. 

• The Prime Minister said that using more reserves for the budget measures will provide the Singaporean society a sense of security.

Outlook for 2021

According to the minister for Finance, the Singapore budget has an operating revenue of S$76.64 billion, or $12.03 billion higher than the previous estimates, due to higher tax collections. Total expenditure is believed to be around $102.34 billion, which, when factored in with the other sources of funds for the budget measures, would lead to a deficit of S$11.01 billion.

Although Singapore was not badly-hit by the COVID-19 pandemic compared to its Asean neighbors like the Philippines and Indonesia, industries still sustained the effects of lockdown measures and travel restrictions. In 2020, Singapore’s gross domestic product (GDP) shrunk by 5.4 percent, making it one of the worst-performing economies in the region.

Information from the Ministry of Finance relayed by Mr. Heng – which is posted on the agency’s website which is showed that the Singaporean government would have access to S$11 billion for the COVID-19 stimulus, which would be used for the acquisition of vaccines and the safe reopening (S$4.8 billion), and to continue the jobs support measures (S$700 million) or additional grants given to workers doing their jobs on limited working hours due to health protocols.

Around S$24 billion would also be poured over the next three years to help companies and workers – through the jobs support scheme – to cope with new normal conditions as Singapore makes its way out of the COVID-19 pandemic. S$900 million would then be placed for additional aid to families under the Household Support Package, S$5.2 billion for the Jobs Growth Incentive, and over S$19 billion for the Singapore Green Plan.

The combined effects of these funds in the Singapore budget 2021 are expected to usher in growth for the economy in 2021: as of now, the Asian Development Bank forecasts that Singapore’s GDP to recover, increasing by 2.0 percent by April 2021, then up to 4.5 percent by September.

Highlights: The Singaporean government would have access to S$11 billion for the COVID-19 stimulus, which would be used for the following:

• Acquisition of vaccines and the safe reopening (S$4.8 billion)

• To continue the jobs support measures (S$700 million) 

• To help companies and workers – through the jobs support scheme – to cope with new normal conditions (S$24billion) 

• Additional aid to families under the Household Support Package (S$900 million)

• Jobs Growth Incentive (S$5.2 billion)

• Singapore Green Plan (S19 billion)

Details and Breakdown

The COVID-19 Resilience Package appears to be the highlight of the Singapore budget  2021 , and rightfully so, as it places $4.8 billion on free and voluntary vaccinations, in addition to doing contact tracing and COVID-19 testing to avert any possible local transmissions in Singapore.

This part of the budget is important also as it assures workers from hard-hit industries like tourism, aviation, and aerospace — all placed by the Ministry of Finance under the list  of Tier 1 sectors — of financial assistance through support measures.

This budget ensures the continuation of Singapore’s Job Support System, which seeks to help people whose jobs were affected by the lockdown periods and economic recession in addition to other reliefs, while ushering in progress for the badly-disrupted businesses.

For those under the Tier 1 sectors list, the government would provide a 30 percent support for April to June 2021 wages, on top of the 10 percent support for the July to September 2021 wages.

Other industries affected, but not as much as the Tier 1 sectors, are then placed into the Tier 2 list. This category includes retail business, those involving arts and culture, food services, and built environment: workers within these industries would receive a 10 percent support for April to June 2021 salaries.

Aside from these, self-employed workers and help workers would also receive support measures as enumerated in the budget: employees who have either lost their jobs or were placed on an involuntary no-pay for at least three consecutive months will get S$700 per month, while employees and self-employed workers facing income loss would get up to S$500 per month.

Another $870 million from the budget would be provided for businesses within the aviations sector to drive growth, while the COVID-19 Driver Relief Fund would give eligible taxi and private hire car divers S$600 per vehicle from January to March 2021, and S$450 by April up to June 2021, costing the government around S$133 million.

S$45 million meanwhile was allocated for the Arts & Culture stimulus package and Sports Resilience Package which would help business and self-employed individuals in this sector.

Singapore’s Household Support Package on the other hand allow the government to hand S$900 million worth of assistance to families, especially for low-income households:

• GST Voucher – Cash Special Payment: lower income Singaporeans who qualify will receive an additional payment of S$200
• Eligible Housing and Development Board (HDB) households will receiving an additional 50 percent of their GST-Voucher U Save, or utility rebates worth between S$120 to S$200
• Eligible households in HBD flats to get rebates to offset Service and Conservancy Charges over one year
• Each Singaporean child would receive a one-off top-up of S$200
• Each Singaporean household would receive $100 worth of Community Development Council vouchers that can be used for heartland shops and hawker centres

Highlights: 

• The COVID-19 Resilience Package places $4.8 billion on free and voluntary vaccinations

• For Tier 1 sectors — workers from hard-hit industries like tourism, aviation, and aerospace —  the government would provide a 30% support for April to June 2021 wages, on top of the 10% support for the July to September 2021 wages.

•  For the Tier 2 list — other industries affected, such as retail business, those involving arts and culture, food services, and built environment — would receive a 10% support for April to June 2021 salaries.

• Employees who have either lost their jobs or were placed on an involuntary no-pay for at least three consecutive months will get S$700 per month, while employees and self-employed workers facing income loss would get up to S$500 per month.

• Businesses within the aviations sector would be provided $870 million

• Eligible taxi and private hire car divers would get S$600 per vehicle from January to March 2021, and S$450 by April up to June 2021

• S$900 million worth of assistance will also be given to families, especially for low-income households

Other Allocations

Despite focusing on the COVID-19 Resilience Package and financial grants on households and employees, Singapore also encourages the hiring of locals by providing incentives to employers, through the Jobs Growth Incentive program.

Under this initiative, employers who would increase their local workforce and the number of local workers earning at least S$1,400 a month. The qualifying window for employers is also extended by seven months, which means more businesses and establishments can join.

The Singaporean Government has allocated S$5.2 billion of the budget to assistance for businesses who will hire workers that fit their classification.

This means the government will also support the wages of employees that are either hired mature citizens or those aged 40 and above, persons with disabilities, or ex-offenders, giving a business owner some sort of relief. For companies, this may translate to wage support for 18 months, or a possible maximum yield of S$54,000 per hired worker that fits the description stated.

These initiatives are expected to provide support to 200,000 locals and give around 35,000 training opportunities.

Around S$1 billion was also set aside to help large local businesses in their shift to digital platforms – like creating email address mechanisms, optimizing their website and social media site, and creating advertising content and articles online – by offering loans which would be managed by commercial financial institutions.

The government will also extend the Enterprise Financing Scheme – Venture Debt Programme, as the cap on loan quantum would be increased to $8 million.

But the Singapore budget is not only about assistance: the Minister for Finance also looks to the future, as it pumps funds into the Singapore Green Plan 2030, an environment-friendly project that centers on food resilience, encouraging the purchase of electronic vehicles, and green financing.

S$60 million would be allocated to the Agri-Food Cluster Transformation Fund which means that the government would continue supporting the use of technology in the agri-food sector. Singapore is also providing S$19 billion worth of green projects, while lessening the prices of electronic vehicles to make them a viable option.

In line with the push for sustainable energy and environment, petrol duties were raised. But affected motorists in Singapore would be given some sort of a relief, with road tax rebates on motorcycles (60 percent) taxis (15 percent) lorries and buses (100 percent), and private cars (15 percent).

Singapore also assured that with the economic crisis at hand, the increase of the good and services tax would be suspended in 2020. The government said that the goods and services tax would increase between 2022 and 2025, but a S$6 billion assurance package would delay the effect by around five years.

Highlights: 

• Singapore encourages the hiring of locals by providing incentives to employers

• Around S$1 billion was set aside to help large local businesses in their shift to digital platforms 

• The government’s debt programme loan quantum would be increased to $8 million.

• S$60 million would be allocated to the Agri-Food Cluster Transformation Fund

• Singapore is also providing S$19 billion worth of green projects, while lessening the prices of electronic vehicles. Affected motorists would be given road tax rebates.

• The increase of the good and services tax would increase between 2022-2025

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