Singapore Strategy – Big fiscal boost to relief cost February 19, 2020 600

  • Singapore GDP forecast for 2020 downgraded by MTI to -0.5% to +1.5% (previously +0.5% to +2.5%). Baseline growth rate for 2020 is 0.5% (2019: +0.7%)
  • Overall 2020 fiscal deficit of S$10.9bn (2.1% of GDP). This compares with the 2019 S$1.6bn deficit (0.3% of GDP). Net Investment Returns is expected to be the largest contributor to government coffers in 2020 at S$18.6bn.
  • Planned 2% point increase in GST to be deferred to 2022 to 2025.
  • Major stimulus includes wage relief, payouts to households and income tax rebate. The government added it is prepared to offer more if the situation worsens.
  • There is no change to our recommendations or forecast. The budget provides some near-term cost relief but it does not change the demand dynamics. A beneficiary of the budget will be supermarket operator Sheng Siong through the wage relief and cash disbursements to households.


Key Highlights

Stabilisation and Support Package (S$2.4bn). Under the Stabilisation and Support Package’s Job Support Scheme , every local worker in employment, the government will offset 8% of wages (monthly wage cap $3,600) for 3 months. It will cost S$1.3bn for 1.9mn workers (i.e. S$228 per month per worker). Another wage support is an increase to the cap of the existing Wage Credit Scheme to a monthly salary of S$5,000. This co-funding of the wage increase will also be raised by 5% points to 15% in 2020.


Corporate income tax rebate of 25% of tax payable but cap at S$15,000 (S$400mn). Enterprises will also be allowed faster write-down of their investments in plant and machinery, and renovation and refurbishment, incurred in 2020. This is one of the measures provided within the Enterprise Financing Scheme, which will cost S$1.6bn.


Care and Support Package for households (S$1.6bn). Depending on income and age, each Singaporean will each receive a cash payout in tranches of either S$100, S$200 or S$300. Eligible HDB households will receive GST vouchers which can at least double their annual eligibility. There will also be grocery vouchers of S$100 for the needy in 2020 and 2021.


Sector snippets

Property. 30% property tax rebate for hotels and MICE venues. 15% property tax rebate for qualifying commercial buildings which we expect to be passed on to tenants.


Construction. New Coastal and flood protection fund of S$5bn to prepare the island against rising sea levels. Fund will be topped up when the fiscal situation allows. Foreign worker S Pass dependency ceiling lowered from 20% to 18% in Jan 2021 and eventually 15% in 2023. Sectors affected are construction, process and marine shipyard.


Consumer. Wage relief, property tax rebate and cash payouts to households will be supportive for the retail industry.


Transportation. Hybrid road tax will be reduced by an average of 29%. This will be positive for taxi operators.


Telecommunications. S$1bn will be set aside over three years to build up the government cyber and data security capabilities.


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About the author

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Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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