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Four Budgets may help Singapore avoid output loss of 5 percentage points or S$23.4b: DPM Heng

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Including about S$93 billion in response to Covid-19, the total size of the four Budgets stands at S$193 billion, more than double the size of annual Budgets in preceding years.

SINGAPORE'S four Budgets this year may help it avoid an annual average output loss of five percentage points or S$23.4 billion, over 2020 and 2021, Deputy Prime Minister and Finance Minister Heng Swee Keat said on Friday.

"Our strong response is projected to stabilise economic activity during this difficult period, and position Singapore for recovery," he said in his wrap-up speech in Parliament for the debate on the Fortitude Budget. The figure is an estimate in a recent study by the Monetary Authority of Singapore, he said.

Including about S$93 billion in response to Covid-19, the total size of the four Budgets stands at S$193 billion, more than double the size of annual Budgets in preceding years. The latest Fortitude Budget also sets aside S$13 billion in the Contingencies Funds, reflecting "both the unprecedented levels of severity, as well as uncertainty, of this crisis", said Mr Heng.

As designed, this fund can be drawn upon if there is a need to do so, and no specific purposes have been designated for it, he added, responding to Member of Parliament Liang Eng Hwa, who had asked in his debate speech for an indication of how the Contingencies Funds might potentially be used.

"In sizing it, we have run some 'what if' scenarios, including the possibility that we may experience a setback in our fight against Covid-19, or the global economy does much worse than currently expected," Mr Heng said. It is a sum "to meet future events or circumstances that are possible, but for which we cannot yet predict with certainty".

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The government is drawing on S$52 billion from the past reserves to fund the Budgets, and the ability to depend on national reserves allows Singapore to deal with the crisis from a position of strength, he added.

This is in contrast to most countries, where borrowing is the only way to fund their large stimulus packages, Mr Heng said. "This increases the risk of unsustainable debt financing, which has severe consequences for the economy in the long run.

"Countries will have to find ways to repay the debt or interest accrued. Future generations will have to shoulder this, whether in the form of higher taxes, higher inflation, or lower returns on retirement assets. The need to service this debt repayment also leaves less fiscal room to invest in human capital or infrastructure.

"The 'Lockdown Generation' in these countries will end up paying for this crisis a long way down the road," Mr Heng cautioned.

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