Singapore’s Budget 2020 was delivered at 3pm yesterday (18 February 2020) by Finance Minister Heng Swee Keat.
Minister Heng addressed many concerns for Singaporeans as the Budget 2020 was delivered at the nation’s weakest economic growth (a growth of 0.7% in 2019) since the Financial Crisis in 2018. The Budget also came amid turbulent shifts in the global economy and growing geopolitical uncertainties. The COVID-19 virus outbreak also added to the financial pressures of the economic downturn.
The Budget 2020 had to address many near-time challenges while maintaining stability and support for the nation in the future, ensure a healthy fiscal position for the national reserves on top of maintaining sound finances. This ensures that we have enough prepared for any surprise challenges such as COVID-19.
With all these considerations to keep in mind, let’s take a deep dive into how the Budget 2020 has differed from last year’s budget to see how the Budget can be shaped differently to address unique and ongoing challenges for the nation.
#1 Additional Skills Future Credit, But With An Expiration Date
The Government has recognised the merits of the SkillsFuture movement launched 5 years ago, which has helped more than half a million Singaporeans pick up new skills and develop new interests.
This has also led to employees upskilling and accessing good jobs in growth sectors, with the support of employers. To encourage this, the Government has decided to invest in the Next Bound of SkillsFuture. This includes the provision of a one-off SkillsFuture Credit top-up of $500, similar to the earlier $500 credit given to Singaporeans when they turn 25.
However, the new top-up, which will be available for use from 1 October 2020, will expire by end-2025 to ensure that Singaporeans make use of this period of economic slowdown to upskill.
#2 Unique Package To Tackle Unexpected Economic Slowdown
The impact of the virus outbreak, amid a slowly recovering economy, has cast concern over jobs and businesses.
A combined $5.6 billion is dedicated to alleviating such fears. Firstly, a Stabilisation and Support Package worth $4 billion is committed to stabilising the economy and supporting sectors directly affected by the outbreak. This includes a Jobs Support Scheme and Wage Credit Scheme that will offset and co-fund wages on behalf of businesses.
The second package is a Care and Support Package set to provide additional help to more households in cushioning the cost of living, with a focus on the less well-off.
#3 GST Not Increased in 2021, But GSTV To Remain
In light of the uncertain economic situation and novel virus outbreak, the GST hike has been deferred. However, its implementation is still due by 2025, due to the nation’s need for recurrent sources of revenue to fund spending needs in the medium term.
The GST will remain at 7%. On top of that, the permanent GST voucher or GSTV scheme will continue. The $6 billion Assurance Package set to offset GST costs will still kick in when the GST is raised from 7% to 9%.
#1 Climate Change Still At Forefront, Increased Measures
Last year, climate change was an issue Budget 2019 wanted to tackle, with the restructuring of the diesel tax.
The issue of climate change still remains at the forefront. This year, Budget 2020 goes even further in managing the nation’s transition towards a low-carbon, low-emissions economy.
$1 billion is dedicated to research in Urban Solutions and Sustainability that will focus on renewable energy, cooling Singapore, and carbon capture, among others.
A Commercial Vehicle Emissions Scheme, similar to the Vehicular Emissions Scheme introduced in 2018, will be implemented for light goods vehicles. There is also an EV Early Adoption Incentive for cars and taxis. Those who purchase fully electric cars and taxis will receive a rebate of up to 45% on the Additional Registration Fee, capped at $20,000.
The road tax methodology for cars will also be revised to move to an across-the-board reduction in road tax for EVs and some hybrids, in a bid to encourage adoption of electric cars.
#2 Seniors And Elderly To Receive Greater Assistance
The Merdeka Generation Package formed a significant component of last year’s budget, with $6.1 billion set aside to cover the lifetime benefits of the Merdeka Generation.
Seniors and elderly are not neglected in this year’s budget either. A Matched Retirement Savings Scheme will be introduced from 2021 to 2025, to help those with less CPF savings to save more. This means that lower-to-middle income Singaporeans aged 55 to 70 will be eligible for the government to match every dollar of cash top-up made to their CPF Retirement Account, with an annual cap up to $600.
A small segment of the elderly population who had low incomes during their working years, or have little to no family support can also benefit from the Silver Support Scheme. The scheme is 5 years old and this review will increase quarterly cash payouts by 20%. The cash payouts will increase from $750 to $900 per quarter for individuals living in smaller flats.
The eligibility criteria of Silver Support will expand to include a payout tier to seniors whose monthly income is between $1,300 to $1,800. These are seniors who are not eligible under the scheme currently.
100,000 more seniors are expected to benefit from the enhanced Silver Support in 2021. The cost of Silver Support will nearly double, from $330 million today to around $620 million in 2021.
Read Also: Merdeka Generation Package 2019: Who’s Eligible And What Singaporeans Will Be Receiving
#3 SMEs and Startups To Enjoy Continued Support
The building of deep enterprise capabilities, and the development of Singapore as a global-asia node of technology, innovation and enterprise remain. Initiatives such as the SMEs Go Digital programme and the Market Readiness Assistance grant continue but are expanded to help more enterprises and enhance the funding support and coverage.
Budget 2020 will add on an Enterprise Grow Package aimed to help enterprises identify business needs, adopt pre-approved digital technologies and move into new markets. A GoBusiness platform will also be launched to offer a single touchpoint for enterprises to transact with the government digitally.
On top of that, an Enterprise Transform Package along with the Enterprise Leadership for Transformation Programme will be kickstarted, in support of nurturing business leaders from small and medium enterprises in achieving their next bound of growth.
Maintain Fiscal Buffers, Exercise Fiscal Prudence
The Budget is shaped differently each year depending on the existing economic climate and needs of the nation, but that does not mean it is completely reactionary. This ensures that the budget can manage near-term, medium-term and future goals while maintaining sustainable social spending.
The COVID-19 outbreak was a stark reminder of how maintaining sound finances is integral in dealing with unexpected scenarios and times of economic uncertainty.
This is the reason why there isn’t a need to dip into past reserves despite the deficit this year, as we are able to lean into sufficient accumulated fiscal surplus.
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