A. Responding To Challenges In A New Decade

    Responding To Challenges In A New Decade

  1. Mr Speaker, Sir. I beg to move, that Parliament approves the financial policy of the Government for the Financial Year 1st April 2020 to 31st March 2021.
  2. This year, we usher in a new decade – one marked by tectonic shifts in our operating environment, and major uncertainties.
  3. Economic Outlook

  4. Singapore’s economy grew by a modest 0.7% in 20191. This is the weakest growth since the 2008 Financial Crisis.
  5. Just as the global economy was beginning to recover, the Coronavirus Disease 2019, or COVID-19, outbreak hit us.
  6. The outbreak will certainly impact our economy.
    1. The tourism and aviation industries are most directly affected. Visitor arrivals to Singapore and air traffic through Changi have declined, and with it, hotel occupancy rates.
    2. The virus outbreak has also disrupted supply chains and created ripple effects on other sectors, especially now that our economy is so much more integrated with China’s.
  7. The Ministry of Trade and Industry (MTI) has downgraded the GDP forecast from between 0.5% to 2.5%, to between -0.5% and 1.5%.
    1. However, the duration and severity of this outbreak and the impact on the global economy are still unclear.
    2. While MTI’s baseline is for GDP growth to come in at 0.5% for the full year, we must be prepared that the economic impact may be worse than we projected.
  8. Dealing with the Immediate Challenges

  9. Our immediate concern is to protect you and your families. We will put in every effort to slow down the spread of the virus.
    1. Our frontline agencies have been fighting and containing the outbreak. I will set aside an additional $800 million in this Budget to support these efforts. The bulk of this will go to the Ministry of Health. This is on top of the substantial resources already committed each year to public health.
    2. Let me, on behalf of the Government, express our gratitude to all our frontline officers who have been working tirelessly, day and night, over weekends, in our fight against the outbreak. You have exemplified the resilience and indomitable spirit of our people. But please take care of yourselves.
    3. I am confident that together, we will stay strong, and get through these trying times.
  10. With these uncertainties, I know Singaporeans are understandably very concerned about the impact on our businesses and jobs.
    1. I will introduce two special packages, with a total budget of $5.6 billion.
      1. The first is the Stabilisation and Support Package. This will stabilise the economy and support our workers and enterprises, by helping workers to stay in their jobs and enterprises with cash flow. I will give additional help to sectors more directly affected by the outbreak.
      2. Households will be impacted by the slowdown too. In every Budget, we always provide support to families. But in view of the current situation, we will have a special Care and Support Package, to provide additional, timely help to more households with cost of living. The less well-off will get more help.
  11. Stabilising and Supporting our Economy in the Near-Term

  12. First, let me elaborate on how we will help our workers and enterprises to weather the near-term economic uncertainties.
  13. Our foremost concern is jobs. We want to help our workers retain their jobs, and use any lull period to upgrade their skills, andbe ready when the upturn comes. As NTUC Secretary-General Ng Chee Meng and his union leaders said, ‘Every worker matters’.
  14. I will therefore provide a Stabilisation and Support Package, amounting to $4 billion.
  15. To help our workers stay employed, I will support enterprises by defraying their wage cost, through two schemes.
    1. I will introduce a Jobs Support Scheme to help enterprises retain their local workers. For every local worker in employment, I will offset 8% of the wages, up to a monthly wage cap of $3,600, for three months.
      1. This payment will be given to employers by the end of July this year.
      2. With over 1.9 million local employees in Singapore, this will cost the Government $1.3 billion and benefit all enterprises and their local employees.
    2. For enterprises that have invested in raising productivity, I urge them to continue to upgrade and to share the gains with their workers. Hence, I will enhance the Wage Credit Scheme to support wage increases for Singaporean workers.
      1. Currently, the Wage Credit Scheme co-funds wage increases for Singaporean employees earning a gross monthly wage of up to $4,000.
      2. I will raise the monthly wage ceiling from $4,000 to $5,000, for qualifying wage increases given in 2019 and 2020, so that more Singaporean employees will benefit.
      3. I will also raise the Government co-funding levels for 2019 and 2020 qualifying wage increases by five percentage points, to 20% and 15% respectively.
      4. With these enhancements, another $1.1 billion will go to about 90,000 enterprises, to benefit more than 700,000 Singaporean employees.
  16. The Stabilisation and Support Package will also provide economy-wide support to help enterprises with cash flow.
    1. First, I will grant a Corporate Income Tax Rebate for Year of Assessment 2020, at a rate of 25% of tax payable, capped at $15,000 per company. This rebate will benefit all tax-paying companies, and cost about $400 million.
    2. I will also enhance several tax treatments under the corporate tax system for one year. For instance, I will allow enterprises a faster write-down of their investments in plant and machinery, and renovation and refurbishment, incurred for Year of Assessment 2021. This will put more cash in the hands of our enterprises.
      1. For example, hotels can now take advantage of this lull period to carry out upgrading work, and be better prepared for the upturn.
    3. To help enterprises access working capital more easily, I will also enhance the Enterprise Financing Scheme’s Working Capital Loan component for one year. I will raise the maximum loan quantum from $300,000 to $600,000, and increase our risk-share on these loans to 80%, from the current 50% to 70%. With the large part of the risks taken up by the Government, I trust that our financial institutions will do their part to support viable SMEs.
    4. We will also support tenants and lessees of government-managed properties, including those under JTC, HDB, SLA, STB, and SDC. They can approach our agencies to discuss options for more flexible rental payments such as instalment plans. Each request will be assessed individually, taking into account the enterprise’s circumstances.
  17. Sectors directly affected by COVID-19 will get additional support. These five sectors are: tourism, aviation, retail, food services, and point-to-point transport services.
    1. To help employers in these sectors retain and reskill workers:
      1. We will enhance support under the Adapt and Grow initiative for this year, specifically through redeployment programmes in the tourism, aviation, retail, and food services sectors. For these sectors, we will extend the funding period for reskilling from three months to a maximum of six months.
      2. Together with the Jobs Support Scheme, we will support employers in these sectors to retain and train more than 330,000 local workers. These workers can make full use of the down time for training and upskilling, to prepare for the recovery.
    2. We will also help affected sectors with their operating costs and cash flow. For the tourism sector:
      1. I will grant a Property Tax Rebate of 30% for the year 2020, for the accommodation and function room components of licensed hotels and serviced apartments, and prescribed Meetings, Incentives, Conventions, and Exhibitions (MICE) venues. International cruise and regional ferry terminals will receive a 15% Property Tax Rebate, and the Integrated Resorts will receive a 10% Property Tax Rebate.
      2. For enterprises in the tourism sector, we will be working with Participating Financial Institutions to introduce a Temporary Bridging Loan Programme for a year, with a loan quantum of up to $1 million and interest rate capped at 5%. The Government will take on 80% of the risk of the loan. This will provide more cash flow on top of the enhanced working capital loan I announced earlier.
    3. For the aviation sector:
      1. We will implement a suite of measures, comprising rebates on aircraft landing and parking charges, assistance to ground handling agents, and rental rebates for shops and cargo agents at Changi Airport.
      2. I will also grant a 15% Property Tax Rebate for Changi Airport.
    4. To support commercial establishments in the food services and retail business:
      1. The Government will take the lead. NEA will provide a full month of rental waiver to stallholders in NEA-managed hawker centres and markets. Other Government agencies, like HDB, will provide half a month of rental waiver to its commercial tenants.
      2. To support establishments that operate in private property, I will also grant a 15% Property Tax Rebate for qualifying commercial properties. I strongly urge landlords to pass this on to their tenants by reducing rentals.
    5. The Ministry of Transport has announced a Point-to-Point Support Package. I am heartened to know that many taxi and private hire car operators have come out strongly to support the initiative by matching the Government’s contribution. This spirit of partnership is what we need to weather this challenging period together.
  18. Details of the Stabilisation and Support Package are in the Annex. [See Annex A-1.] The Ministers in charge of the various measures will share further details in due course.
  19. We will continue to monitor the situation closely. If needed, we can and are prepared to do more.
  20. I will speak about the Care and Support Package for households later in my speech.
  21. Maintaining Sound Finances to Respond to Uncertainties

  22. The COVID-19 outbreak is a stark reminder of the continued importance of maintaining a sound fiscal footing to deal with surprises and unexpected scenarios.
    1. In particular, we are able to mount a decisive response to support Singaporeans and workers through uncertain times only because of good long-term planning.
  23. I announced in 2018 that we plan to raise the GST by two percentage points, to 9%, sometime from 2021 to 2025. This is to raise recurrent revenues to meet our growing recurrent spending, particularly for healthcare.
  24. After reviewing our revenue and expenditure projections, and considering the current state of the economy, I have decided that the GST rate increase will not take effect in 2021. In other words, the GST rate will remain at 7% in 2021.
  25. However, we will not be able to put off the increase indefinitely. In fact, this outbreak has reinforced the importance of continued investment in our healthcare system, including the capability to deal with outbreaks. And we will still require recurrent sources of revenue to fund our recurrent spending needs in the medium term.
  26. Thus, the GST increase will still be needed by 2025.
    1. We will assess carefully the appropriate time for the increase. But rest assured we will provide Singaporeans sufficient lead time.
  27. I want to assure everyone that when we raise the GST rate, we will ensure that our taxes and transfers system remains progressive.
  28. We will continue to absorb GST on publicly-subsidised healthcare and education.
  29. And just as we have done in the past, we will provide an Assurance Package when the GST rate is raised. This will be a $6 billion package for Singaporeans, to cushion the increase as we transition to the higher GST rate.
    1. GST is paid by all in Singapore, including foreigners visiting and working here. But the Assurance Package will benefit Singaporeans.
    2. The majority of Singaporean households will receive offsets to cover at least five years’ worth of additional GST expenses incurred.
    3. Lower-income households will receive much more. Those living in 1- to 3-room HDB flats will receive offsets equivalent to about 10 years’ worth of additional GST expenses incurred.
  30. Under the Assurance Package for GST, every adult Singaporean will receive a cash payout of $700 to $1,600 over five years.
    1. To illustrate, a family of four with a combined income of $6,000 living in a 4-room HDB flat can receive about $7,000 in offsets over five years in total. This includes cash of about $4,000.
  31. Over and above the transitional support, we already have the permanent GST Voucher or GSTV scheme. It defrays GST for lower- to middle-income Singaporeans. When the GST is raised, I will enhance the permanent GST Voucher scheme. I will maintain the Government’s public commitment to:
    1. Fully offset the GST for the lower half of retiree households;
    2. Significantly offset the GST for the upper half of retiree households; and
    3. Offset about half of the GST for lower-income households with no elderly persons.
  32. This is the Government’s way of ensuring our system of taxes and transfers remains progressive and supports Singaporeans through the change, while enabling us to fund our future needs in a sustainable way.
  33. To meet this commitment, I will set aside $6 billion for the Assurance Package in the GSTV Fund in this year’s Budget.
  34. Navigating Long-Term Structural Shifts

  35. Even as we navigate our near-term challenges, we must maintain our focus on the longer term, and on Singapore’s future.
  36. I have spoken about the accelerating structural shifts in the world in my previous Budget speeches:
    1. First, the decline in support for globalisation;
    2. Second, the shift in global economic weight towards Asia, which brings new opportunities;
    3. Third, the rapid advancement of technology, and more recently, the risk of a technologically bifurcated world; and
    4. Finally, our own transition to an ageing society, which presents challenges and opportunities.
  37. We must understand these shifts, and their deep implications, as we chart our future together as one Singapore.
  38. After the Second World War, nations experienced several decades of growth and prosperity.
    1. Trade barriers fell, and global trade grew rapidly.
    2. Technological advances transformed people’s lives beyond recognition.
  39. Prosperity gave governments the resources to establish comprehensive safety nets and welfare programmes. These included unemployment benefits, pensions, and healthcare, among others.
  40. But at the same time, globalisation and technology created winners and losers, and widened income inequalities between the skilled and unskilled.
  41. There are growing sentiments that globalisation and the multilateral system have failed.
    1. As a result, nations are turning inwards. Protectionism and nativism are on the rise.
  42. An ageing population, disruption to jobs, and slowing economic growth are adding to fiscal pressures.
    1. Yet it is politically untenable to cut back on social benefits.
    2. When governments issue debt to fund social spending, they impose a growing debt burden on the next generation.
  43. This is happening at a time when the global economy is experiencing weaker growth and dampened sentiment.
    1. Central banks have lowered interest rates to unprecedented levels.
    2. In addition, asset purchases by central banks have resulted in abundant liquidity and raised concerns over the formation of asset bubbles.
    3. In fact, with limited fiscal space, and ultra-low or even negative interest rates, governments and central banks are much less able to mount stabilisation measures.
  44. On the strategic front, the friction in the US-China relationship is a major source of tension and uncertainty, affecting global economic growth.
    1. The recent Phase One trade deal between them has headed off an immediate escalation. But it will not resolve the underlying strategic competition. This involves political systems, ideologies, and values, and goes way beyond trade and technology.
    2. On present trends, US-China tensions will recreate geopolitical fault lines, and portend a bifurcated global order.
  45. Advancing as One Singapore

  46. I have sketched out the global structural shifts, economic uncertainties, and strategic tensions. I trust Members will see that we are entering a very challenging time. But we can, and we will pull through.
  47. To deal with these major shifts, we need a capable government, working closely with our people, and a good plan.
  48. As a city-state, we are small, but nimble.
    1. We are a trusted node for trade and investment between Asia and the world. This is because of our political stability, commitment to rule of law and multilateralism, ease of doing business, and strong intellectual property protection regime, among others.
    2. As a multicultural society, we have welcomed diversity and embraced openness. Our diversity has made us stronger, and more valuable to the world.
  49. Our biggest asset is our exceptional people.
    1. We have come together and weathered many past storms, like the Global Financial Crisis, SARS, and now, the ongoing COVID-19 outbreak.
  50. Budget 2020 is our strategic financial plan to prepare Singapore and Singaporeans to meet these challenges and seize new opportunities.
  51. This Budget, I will lay out our plans in four areas:
    1. First, to grow our economy, transform our enterprises, to create opportunities for our people.
    2. Second, to care for and nurture Singaporeans at every stage of their lives, to build a caring and inclusive society, where no one is left behind.
    3. Third, to build a liveable and sustainable Singapore in the face of climate change, secure our sovereignty as an independent nation, and ensure our fiscal sustainability.
    4. And fourth, to mobilise Singaporeans to work together in this journey, to build a nation and a home we will always call our own.
1 Source: Economic Survey of Singapore 2019, Ministry of Trade and Industry.