The Straits Times says

Fiscal support still needed in 2021

The renewed lockdowns in the United States and Europe in the wake of new waves of Covid-19, as well as the tightening of restrictions in Hong Kong, Malaysia, Japan and Taiwan, are a reminder that even after raging for more than a year, the pandemic is far from over. The roll-out of vaccines should help contain the spread, but that will be a prolonged process. It will not be until well into the second half of 2021, at best, that the pandemic may possibly be brought under control. In these circumstances, economies will need continued fiscal support from governments. US lawmakers agreed on a new US$900 billion (S$1.2 trillion) package of relief measures - which President Donald Trump has now rejected - on top of the more than US$2 trillion passed earlier. This would have brought the total fiscal support this year to more than 13 per cent of gross domestic product. The incoming administration of president-elect Joe Biden has pledged even more stimulus next year.

Many European countries which are reeling from repeated lockdowns will also almost certainly need to step up fiscal assistance from already record levels. In October, the International Monetary Fund cautioned that one of the biggest risks in responding to the economic impact of the pandemic would be a premature withdrawal of fiscal support. That is even more true now.

It also applies to Singapore. Although the Government has pledged close to $100 billion in spending in response to the pandemic - equal to about 20 per cent of GDP - and is likely to run a record fiscal deficit of more than 15 per cent of GDP this financial year, there is a case for continued fiscal support. With the economy starting to recover, this would need to be carefully targeted. For example, while there is no case for providing broad-based wage subsidies, the Jobs Support Scheme which tapers off in March may need to be extended for sectors likely to remain hard hit, such as aviation and tourism-related sectors, the prospects for which are still bleak.

The Jobs Growth Incentive, under which the Government co-pays salaries of new local hires and which will expire in February, may also need to be selectively extended. And with unemployment likely to remain high, the Covid-19 Support Grant - which provides temporary assistance to those who suffer involuntary job and income losses, and applications for which end on Dec 31 - will need to be carried over into 2021.

On top of providing reliefs, the Government must also continue to maintain public investments in health, education, training and green infrastructure, which can be both job creating and boost sustainability and resilience in the economy. There will come a time when the Government will need to rebuild its fiscal position. But for now, fighting the impact of Covid-19 must continue to be the priority.

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