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Second support package could be larger, more immediate: economists
THE second package of government support measures amid the Covid-19 outbreak is expected to be larger than the first S$4 billion one, given the increased severity of the situation, economists have said.
They expect this second lot of helplines to mainly expand on or intensify the earlier batch of measures.
The government is not ruling out the use of past reserves for the new package, Deputy Prime Minister and Finance Minister Heng Swee Keat said on Wednesday. This is despite the current term of government's S$7.7 billion surplus.
CIMB Private Banking economist Song Seng Wun thinks the upcoming package could be two to three times the size of Budget 2020's S$4 billion Stabilisation and Support Package.
"Round one was premised on a smaller contraction of perhaps half a per cent of gross domestic product," he said.
But with a global pandemic now unfolding, Singapore could be hit by several quarters of contraction, so the scale of help could rise accordingly, he added.
In the global financial crisis, there was a S$2.9 billion package in November 2008, followed by a S$20.5 billion Resilience Package in January 2009, noted OCBC Bank chief economist Selena Ling.
"So the question is if a global or domestic recession is impending, and how deep or prolonged this downturn will be."
If the second package is larger than the first, it is hoped that it will avoid a situation in which subsequent rounds are still required, she added.
But Mr Song thinks the second package may be more focused on immediate needs, leaving open the possibility of future rounds: "You don't know how protracted this will be."
He expects it to be "along the lines" of the first package, but with larger amounts, longer durations of aid, and payouts arriving sooner.
Ms Ling agrees, suggesting more wage offsets under the Jobs Support Scheme and an extension beyond three months, as well as more upfront assistance to hardest-hit sectors, such as more rental rebates.
Small and medium-sized enterprises (SMEs) could be given more financing access through lower interest rates or deferred payments, she said.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye agree on a need for speed.
Seeing the first package as "focused on restructuring, transforming and retraining, with most of the funds to be deployed slowly and over a longer term", they hope the second one can do more to address immediate cash flow needs.
In contrast, Citi economists Kit Wei Zheng and Ang Kai Wei suspect that the second package might be rolled out closer to the second half of the year, given existing efforts to expedite disbursements, and Mr Heng's stated preference for companies to "make the most" of the first S$4 billion package.
The Maybank economists suggest having wage subsidies for worst-hit sectors, expanding the temporary bridging loan programme to more sectors, and relaxing some macro-prudential measures such as loan-to-value ratio limits.
They also suggest waiving three months' of foreign worker levies for the worst-hit sectors. Foreign worker levy reductions were included in the 2003 Sars Relief Package, but conspicuously absent from the latest.
This waiver "will not detract from the longer-term restructuring and productivity drive", said the Maybank economists.
"A brief waiver of foreign worker levies - including those under mandatory quarantine - will add to the bottom line, help companies stay afloat, and prepare them for the upturn when the recovery materialises."
Besides support for workers and SMEs, the second package will include help for the self-employed and retrenched workers, said Mr Heng.
Existing measures for some groups of self-employed individuals could be intensified, such as by increasing the current reliefs for taxi and private-hire car drivers, said Mr Song.
But many of the self-employed may not be in occupations where such measures can be applied.
For them, Ms Ling suggests measures such as personal income tax relief or deferred payments, property tax rebates, and additional rebates for goods and services tax, or service and conservancy charges.
The problem facing the self-employed is that they have to pay taxes on last year's income, even if the virus outbreak has led to a lack of current income, noted Mr Song.
"This is the perfect year to have a tax holiday and move into a pay-as-you-earn system," he added, while acknowledging that this would take a toll on government revenue.