Singapore to release S$1.5b support package as energy prices stay high

SINGAPORE is committing S$1.5 billion on inflation relief for businesses and households, as global prices climb faster than earlier projected and are likely to stay high.

The support package, announced by Deputy Prime Minister Lawrence Wong on Tuesday (Jun 21), will be funded from Singapore’s better-than-expected fiscal position in FY2021, the Ministry of Finance (MOF) has said. There will be no drawdown on the nation’s past reserves.

“The situation is highly fluid and the government will continue to monitor it closely and adjust our measures and programmes as necessary,” said Wong, who is also Finance Minister.

That’s as he warned at a press briefing that “we are dealing with multiple crises at the same time” – namely, the Covid-19 pandemic, a global economic slowdown, and inflation.

With energy prices possibly elevated into the second half of the year, certain small businesses will now get government funding of up to 70 per cent for energy-efficient equipment. The new Energy Efficient Grant is aimed at the food services, food manufacturing, and retail sectors.

Co-funding investments in energy-efficient equipment “is a more sustainable way to help our businesses to manage energy prices which are beyond our control”, the MOF said. Separately, every Singaporean household will also get S$100 in credits to defray utilities bills.

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Meanwhile, eligible cabbies and private-hire drivers will receive one-off relief to the tune of S$150 in August, while combi bus, limousine and delivery drivers who are part of labour movement-linked groups can apply for up to S$300 in cash from the National Trades Union Congress.

To a question on how elevated energy costs will filter into fuel prices at the petrol pump in Singapore, Wong replied: “In fact, we are trying to accelerate our shift towards cleaner vehicles, more energy-efficient vehicles, and, in a way, this is a timely opportunity for us to do so.”

Given neighbouring Malaysia’s ongoing restrictions on live chicken exports, which the MOF said “has cut off the livelihoods” of Singapore’s 11 chicken slaughterhouses, these businesses will also receive waivers on foreign worker levies for 1 month to “preserve industry capabilities”.

To help businesses with cash flow, the package will expand schemes such as for trade loans and working capital loans. For instance, the loan maximum under Enterprise Financing Scheme – Trade Loan will be doubled to S$10 million from Jul 1, 2022 to Mar 31, 2023.

The government is also enhancing ongoing incentives that encourage employers to raise lower-wage workers’ salaries and to hire older and disabled workers, as well as ex-offenders.

Co-funding for the Progressive Wage Credit Scheme will rise to 75 per cent of eligible wage increases in 2022 for locals earning up to S$2,500, up from 50 per cent before. The funding share will rise to 45 per cent for resident employees making between S$2,500 and S$3,000, up from 30 per cent before.

Meanwhile, the Jobs Growth Incentive will be extended by another 6 months, to March 2023.

Senior Minister of State for Finance and Transport Chee Hong Tat noted that businesses are facing higher operating costs and cash-flow concerns, and said that the government “will step in to cushion these near-term energy and labour cost increases”.

“At the same time, we have to press on with enterprise and workforce transformation efforts, especially in the areas of energy efficiency and labour productivity,” he added, calling such an approach “the best way to deal with the cost increases over the long term”.

“Please understand that the challenges before us are not just about inflation, they are also about adapting to major structural changes in our operating environment,” said Wong.

“We have to keep on moving forward to restructure and transform ourselves. At the same time, it is also important that we move forward in a fiscally responsible and sustainable manner.”

He cited threats from rising temperatures and geopolitical tensions, which he said may produce a new world “likely to be more uncertain, volatile and even more dangerous than before”.

When asked about the possibility of delaying a 2-percentage point hike in the Goods and Services Tax, Wong told reporters: “We cannot afford to slow down, and that includes ensuring that we have a strong and sustainable fiscal position going forward.”

The MOF also said that “we should not distort price signals, as these are needed to guide our economic restructuring and transformation” amid climate change and an ageing population.

But policymakers will “do more to support businesses and workers through this transition”, as some businesses may face higher near-term operating costs, the ministry noted.

The latest package was billed as building on support measures unveiled earlier this year, and Wong told the press that “we will not need to pass a supplementary Budget at this point”.

Instead, the package will be funded from the FY2021 fiscal outturn, as the government netted higher revenues and spent less than projected during the milder infection wave by the Omicron variant of the coronavirus. Wong also said that “ministries will re-prioritise within their existing budgets” to pay for the latest measures.