COVID-19 SPECIAL: Fortitude Budget

Budget provides more to cushion downturn - and a springboard to the future

Unity, Resilience, Solidarity, and now Fortitude.

These are what Singapore's four Budgets have been christened, capturing the qualities that Singapore will need to get through the Covid-19 crisis, according to Deputy Prime Minister and Finance Minister Heng Swee Keat.

In the process, we will spend $92.9 billion.

At close to 20 per cent of the country's gross domestic product (GDP), it adds up to the biggest fiscal stimulus package in our history, and among the largest in the world.

And there may be even more to come.

It still won't be enough to prevent a brutal recession, which could see GDP shrink by as much as 7 per cent this year or, if we're lucky, by 4 per cent, as per the Ministry of Trade and Industry's latest forecast.

The $33 billion Fortitude Budget presented by Mr Heng yesterday draws partly on the playbook of past Budgets.

Some familiar measures have been extended. The Jobs Support Scheme will be prolonged by another month for all firms, with some getting wage subsidies of 75 per cent until August, subject to a ceiling of $4,600 per employee.

In all, companies will have their wage costs subsidised for 10 months.

Waivers and rebates on foreign worker levies will be extended for as long as two months for businesses that cannot resume operations when the circuit breaker is lifted on June 2. Small and medium-sized enterprises (SMEs) will get cash grants to offset their rental costs for up to two months.

It may not be the last Budget. Mr Heng has set aside $13 billion in a contingency fund, to respond to as yet unforeseen developments that the Covid-19 crisis might create, whether medical or fiscal. Even more than that, and more radical measures, may be needed. But for now, the Fortitude Budget should be sufficient to see us through.

The backstopping of wages and rentals - which make up the biggest costs for most businesses - amounts to a huge cushion for the corporate sector and especially for SMEs. It will hopefully prevent some layoffs and enable businesses to survive.

But in a recession as severe as what we're up against, unemployment and bankruptcies will be inevitable.

As Mr Heng said, "we cannot protect every job". Some economists forecast that layoffs could run as high as 200,000 this year.

And so, now there is another cushion, called the SGUnited Jobs and Skills Package, a $2 billion programme which is arguably the centrepiece of the Fortitude Budget. It is ambitious, seeking to create almost 100,000 new opportunities for workers, including 40,000 jobs - including 15,000 in the public sector - 25,000 traineeships and 30,000 skills training opportunities for local job seekers.

But if it is to work, it will need various actors to seize the opportunities on offer.

 
 
 

While the public sector can be counted on to create new jobs in areas such as early childhood education and healthcare, private sector companies - on which most of the new employment will depend - will need to step up to the plate to offer traineeships and employment, to both new graduates and laid-off mid-career workers, taking advantage of new hiring incentives that the Fortitude Budget has introduced.

Retrenched workers would need to commit to upgrading their skills, which will enable them to get a monthly payout of $1,200 while they do so.

In short, the creation of new jobs and new skills will not be automatic. It will need commitment by both companies and workers, and coordination by the new National Jobs Council that has been created, led by Senior Minister Tharman Shanmugaratnam, a former deputy prime minister and finance and education minister.

The Fortitude Budget also has the foresight to prepare the ground for the economy to thrive in the post-Covid world. It will be different. Both consumer and business behaviour will have changed, in many ways permanently.

Consumers will be transacting more online. Companies will be operating in increasingly virtual environments. More business services, education, healthcare and even entertainment will be delivered digitally. E-commerce, e-communication and e-payments will become part of the new normal. The economy will increasingly be digitally driven.

Citing a study by consulting firm McKinsey, Mr Heng revealed a stunning statistic: The Covid-19 crisis has resulted in five years of digital adoption around the world being compressed into eight weeks. In Singapore, 50,000 businesses have adopted e-payment platform PayNow Corporate since last month.

Going forward, every business, institution and individual will need to be at least digitally ready, if not savvy.

 
 
 

And so the Fortitude Budget has set aside $500 million to support businesses in their digital transformation, down to hawkers, wet markets and coffee shops. Some $250 million will be allocated to help businesses develop offline-to-online solutions to meet new demand both locally and globally.

More resources and expertise will be poured into online education, which could open up new markets. Disadvantaged students and seniors will get help to become equipped with both hardware and digital skills.

Using the Covid-19 crisis as an opportunity, the Fortitude Budget will help to fast-track Singapore's transition to a digital economy. If all goes well, it will provide both a cushion and a springboard.

It may not be the last Budget. Mr Heng has set aside $13 billion in a contingency fund, to respond to as yet unforeseen developments that the Covid-19 crisis might create, whether medical or fiscal. Even more than that, and more radical measures, may be needed. But for now, the Fortitude Budget should be sufficient to see us through.

 
A version of this article appeared in the print edition of The Straits Times on May 27, 2020, with the headline 'Budget provides more to cushion downturn - and a springboard to the future'. Print Edition | Subscribe