S$1.1b support package for Phase 2 Heightened Alert to be funded through budget reallocation

THE support measures for the current Phase 2 (Heightened Alert), or P2HA, will be financed through budget reallocations, through underutilised expenditures and funds that had been set aside as a buffer, Finance Minister Lawrence Wong said in Parliament on Monday.

This latest set of measures, which are expected to cost S$1.1 billion, were announced last week after Singapore's Covid-19 taskforce tightened restrictions for four weeks from July 22 to Aug 18 due to the emergence of several large clusters involving various KTV lounges and the Jurong Fishery Port.

Mr Wong said the Ministry of Finance has worked with agencies to identify S$900 million of "one-off under-utilisation" in operating and development expenditures, which are due to delays brought about by Covid-19.

This includes postponement and cancellation of activities in schools due to the pandemic as well as construction project delays.

Mr Wong said these delayed expenditures will still need to be incurred in the future, as Singapore recovers from Covid-19.

The remaining amount is provided for in a "buffer" as part of the Supplementary Estimates presented in July.

"We had provided a buffer of S$0.2 billion in anticipation that this might be needed for modest enhancements or extension of the support measures. We are now making use of the buffer for this package," said Mr Wong.

He added that the supplementary supply bill that he introduced on Monday reflects this reallocation together with that announced in his previous statement.

In all, the government is providing more than S$2 billion of support to workers and businesses over the two periods of Heightened Alert from May.

The latest round of measures include an extension of the Jobs Support Scheme for affected sectors, and rental relief for small and medium enterprises and hawkers, who also get an additional month of rental waiver and subsidies.

The Covid-19 Driver Relief Fund will also be extended, while workers affected by safe-management measures can re-apply to receive a second payout under the Covid-19 Recovery Grant - Temporary scheme.

Given that the support package is funded through reallocation, Singapore's overall fiscal position for financial year 2021 is expected to remain unchanged with an overall deficit of S$11 billion, or 2.2 per cent of gross domestic product (GDP), Mr Wong said.

Overall, the latest P2HA is not expected to derail Singapore's economic recovery - with Singapore set to remain on track for a 4 to 6 per cent GDP growth this year - as long as "external demand remains healthy", he added.

This is because 70 per cent of Singapore's economic activities are outward-oriented sectors, even if domestic consumer-facing sectors, including retail and food and beverage, will continue to face challenges during this period, he said.

"The bigger uncertainty to our recovery therefore is the impact that the Delta variant may have on the major economies in Europe and the US, and on external demand," Mr Wong said, referring to the highly transmissible strain of the virus that originated from India.

He added that most economists are still projecting a robust global economic recovery this year, although there are growing fears the resurgence in cases seeded by the Delta variant could force a return to lockdowns.

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