Singapore's trade-dependent economy is unlikely to escape the fallout from the coronavirus outbreak, but help for companies and employees is on its way as part of the upcoming Budget.
The bumper surplus that has been accumulated over the past four years will give the country the financial ability to manage threats from the deteriorating economic environment.
A targeted spending plan can help companies hit by fears of a pandemic and individuals deemed vulnerable to the rough patch the economy may go through.
In the wake of the severe acute respiratory syndrome outbreak, a $230 million relief package to support the tourism, transport, retail and food and beverage industries was rolled out in 2003. This included rebates for property, road and diesel taxes and foreign worker levies, as well as bridging loans and training support.
Similar measures and more could be announced on Feb 18, given that the economic conditions in recent years have not been as conducive to growth as they were 17 years ago.
The total accumulated surplus will be $17.9 billion, according to DBS Bank estimates.
That puts Singapore in a position to roll out an expansionary Budget with a historically high deficit to shore up the economy.
"An overall deficit of about $7.9 billion (1.6 per cent of nominal GDP) is expected, the biggest in a decade," said Mr Irvin Seah, the bank's senior economist.
The massive deficit, however, does not mean longer-term targets of economic transformation will be compromised. "Besides helping companies and Singaporeans cope with the effects of the epidemic and rising costs, enhancing capabilities and upgrading of skills will remain as some of the key thrusts," Mr Seah said.
The escalating United States-China trade war made 2019 a challenging year. Non-oil domestic exports plunged by about 9 per cent, hitting the manufacturing sector and some externally oriented service segments.
As a result, gross domestic product (GDP) growth likely slumped to just 0.7 per cent, making it the weakest annual expansion since the global financial crisis in 2009.
SKILLS UPGRADING REMAINS KEY
Besides helping companies and Singaporeans cope with the effects of the epidemic and rising costs, enhancing capabilities and upgrading of skills will remain as some of the key thrusts.
MR IRVIN SEAH, DBS Bank's senior economist
On top of weak growth and exports, rising business costs emerged as another key concern last year.
A recent survey by the Singapore Business Federation underscored the increase in costs such as rental and raw materials, as well as rising wages.
A series of manpower tightening measures introduced over recent years to prompt companies to invest in technology may have contributed to the spike in costs.
Corporate income tax rebates, utility and rental rebates, extension of the employment and wage credits, and perhaps a one-off small and medium-sized enterprises (SMEs) Cash Voucher - for companies that are not paying taxes - are possible ways to alleviate the cost pressure.
Beyond those measures, the Government will likely continue enhancing the capabilities of enterprises, upskilling workers, encouraging SMEs to invest in their human capital, and helping companies internationalise.
United Overseas Bank (UOB) economist Barnabas Gan noted that efforts to boost competitiveness and competencies may take centre stage in the Budget.
This could take the form of further tax deductions and/or extensions of research and development-led tax incentives, while tax incentives to encourage companies to invest in digital solutions and tools could also materialise, he said. "We expect that there will be a focus on aiding workers, especially mid-career professionals, managers, engineers and technicians (PMET), to retrain and to acquire new skills."
The need to reskill and ultimately to restructure the labour market is made even more crucial as more than 32,000 jobs will be created over the next few years, Mr Gan added.
Almost half of these jobs will require skills in digital technologies.
Still, the negative impact of the ongoing coronavirus outbreak could spill over to the labour market. That could make strengthening social safety nets a Budget priority.
UOB expects an enhanced goods and services tax support package is likely ahead of a GST rate increase from 7 to 9 per cent some time between next year and 2025.
Policymakers can consider tax deductions to get companies to hire retrenched resident PMETs, according to DBS' Mr Seah.
The Straits Times will be providing live coverage as Mr Heng announces the details in Parliament.
Readers can also sign up for e-mail updates of the proceedings.