Singapore’s Finance Ministry has introduced additional measures to the tune of another S$8 billion to counter the economic fallout from the coronavirus (COVID-19) pandemic given the “rapidly changing situation.”
The state has in the previous four budgets this year – Unity, Resilience, Solidarity and Fortitude – channelled S$92.9 billion (or 19.2% of GDP) to save jobs, shore up businesses and strengthen economic and social resilience. With the latest measures announced on 17 August, total outlay to date comes to S$100.9 billion (20.9% of GDP).
The measures are targeted at (1) jobs support and creation of new employment opportunities (2) assistance for hardest hit sectors and (3) positioning Singapore to seize growth opportunities in a post- COVID-19 world.
First, Singapore’s job market will likely stay weak despite the extension of the Job Support Scheme (JSS). Given that the COVID-19 pandemic around the globe has been more protracted and resurgence in many regions, the negative impact on Singapore’s job market will likely persist into early 2021.
Hence, the JSS which was supposed to end in August 2020 has been extended to March 2021 although wage subsidies will be lowered for specific industries – with the aerospace, aviation, tourism and built environment getting 50% wage support; 30% for arts & entertainment, food services, land transport, marine & offshore and retail while most other sectors will see 10% of support to March 2021, with the exception of biomedical sciences, financial services and information and communication technology (ICT) industries which will see wage support cease in December 2020. While it is good news for employers, the reduced support may introduce a higher wage burden for employers, which in turn could lead unemployment rate higher. Our outlook for unemployment is for jobless rate to rise to as high as 3.5%.
Secondly, Singapore remains a small and open economy which is highly reliant on trade which will be affected by external factors such as US-China trade tensions and the evolving global supply chain. Hence, the need to adapt to the evolving economic landscape, given the acceleration of the digital shift amid a reconfiguration of the global supply chain. In addition, there is a crucial need to stay in-tune with the new areas of growth such as healthcare and artificial intelligence.
Third, there are still bright spots in Singapore’s economy despite the current economic slowdown. Biomedical sciences, financial services and ICT sectors are still in “need of more workers” while healthcare-related sectors continue to expand headcount. The biomedical manufacturing sector remains the best performing cluster year-to-date. There has been increased demand for medical goods during the COVID-19 pandemic, which could continue to see growth in non-oil domestic exports (NODX).
We keep to our full-year GDP outlook of -5.0% in 2020, given the continued slowdown in Singapore’s economy amid a softening labour market. While the contraction in GDP has bottomed in 2Q20 due to the Circuit Breaker and Phase One restrictions and will remain in contraction at a more moderate pace in the second half of 2020, the current economic environment remains extremely uncertain at this juncture, especially given how the pandemic may evolve in the coming months amid the risk of further resurgence in global infections even as restrictions are gradually lifted across the world.
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