Thoughtful governments need to address certain key issues before rolling back relief measures that were introduced to help companies and individuals cope with the economic fallout of the Covid-19 pandemic.
Job creation, the shape of the economy and sustainability need all be carefully considered before easing off financial support.
Most countries have to devise an exit plan to prevent companies and individuals from relying too much on government aid during the pandemic, said DBS Bank chief executive Piyush Gupta yesterday.
So far, governments have given money to the unemployed, to families and to firms to save jobs, Mr Gupta said at a virtual briefing ahead of the DBS Asian Insights Conference later this week. However, "most of this money spent... kicks the can down the road".
He added that such approaches have a short shelf life because "governments don't have infinite money" and that they create moral hazards because "people just get accustomed to the idea of getting constant bailout".
Governments have to exit from this financial logic and realise that they cannot be a "final set of recourse to everybody".
The United States, for example, is debating whether to continue handing out US$600 (S$834) a week to the unemployed, given that some lawmakers see the payments as inhibiting economic recovery by disincentivising residents to work.
The Monetary Authority of Singapore has started talking to banks about helping debtors who had taken up relief measures with a soft landing when the measures are rolled back by the end of this year.
At the height of the crisis, the central bank had thrown such cash-squeezed firms and individuals a lifeline by allowing them to defer repayments, among other measures.
Mr Gupta said: "The reality is that most countries are going to (come up with a soft landing)... The exit from the set of measures cannot be cold turkey."
The exit plan, which will have to be calibrated and tailored, must aim at investment and not consumption, he added.
The challenge for governments is to decide where to continue greasing the wheels, Mr Gupta added.
"Covid-19 creates a tremendous opportunity to establish a reset... to start rethinking about the role of the private sector and what we can do to make a difference."
Singapore is already taking steps to ensure its recovery from Covid-19 will factor in environmental concerns. To support this, Mr Piyush Gupta pointed to his work as part of the Emerging Stronger Taskforce to help Singapore deal with the longer-term impact of the pandemic.
"We have landed on a sustainability set of actions and items as an important part of the way forward," he said. "So, it's quite clear to me that there is some serious... thinking (that) will allow us to actually put environment and a green recovery as the heart of the future job creation and the growth paradigm."
The 17-member task force comprises the Government and representatives from the private sector, including CapitaLand Group chief executive Lee Chee Koon, Changi Airport Group CEO Lee Seow Hiang, ST Engineering president and CEO Vincent Chong and Pontiac Land Group head of hotels Kwee Wei-Lin.
Chaired by Minister for Social and Family Development and Second Minister for National Development Desmond Lee and PSA International group CEO Tan Chong Meng, it aims to share the first set of preliminary recommendations with the Future Economy Council by early next year.
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But he added that all hands must be on deck to support the change.
"If (governments) are thoughtful, (they) will think about issues like job creation, about the future shape of (their) economy and sustainability," Mr Gupta said.
"If we can get this right, then we can recognise that the environmental, social and governance agenda... will become front and centre of the new development paradigm."
Mr Gupta pointed out that the economic fallout from Covid-19 signals not just a cyclical crisis, but a massive slowdown and restructuring that could introduce new ways of work and life, the way the Great Depression in the 1930s led to the creation of an immense social security network and unemployment benefits in the US.
Governments should decide now how to build back better. But the going will be tough, he said.
"Making choices is always a poisoned chalice for any government and for any leadership. It is not easy to do, but nevertheless, it is an opportunity and in many cases, I think leadership will come through and make those kind of choices in a sensible way," Mr Gupta said.
United Nations Development Programme administrator Achim Steiner, the other panellist at the conference, said that the jury is still out on whether 2020 will be a year of disaster or opportunity.
He added that there is "very limited room for conceiving the future in a different way (given that) the pandemic is getting worse".
"The next six to 12 months will be highly stressful, uncertain and bear enormous risk," he said.
"One of the things that clearly will determine (the path ahead) is where leadership is going to come from."