Singapore Budget 2020 commentary

Deputy Prime Minister and Minister for Finance, Mr Heng Swee Keat, delivered his Budget 2020 speech on 18 Feb 2020.

All Singapore Budget speeches seek to balance the near-term needs of the population and businesses with the longer-term goal of transformation; but very few in the history of the nation would have done so in such stark focus. Our Deloitte Budget theme is ‘Together Today. Transforming Tomorrow.’ and this balanced blend of current and future was clearly evident.

Budget 2020 is exceptional in many ways and could also well be a roadmap for how Singapore’s 4th generation (4G) government will approach policymaking. For one, as part of the “Singapore Together” movement, the Government has taken considerable effort to understand people’s needs and incorporate these into the Budget measures. Among other things, the public was asked to give their views on the priorities for Budget 2020, including support for business growth, training and employment, families, and senior citizens.

Budget 2020 also comes about in extraordinarily challenging times. The Ministry of Trade and Industry (MTI) downgraded its economic growth forecast for Singapore to between -0.5% and 1.5% one day before the Budget 2020 announcement, citing the adverse impact of the COVID-19 outbreak and uncertainties in the global economy. The downgrade came 3 months shortly after the MTI had forecasted a modest economic growth for 2020 of between 0.5% and 2.5%.

Faced with the slowest growth since 2009, there were high expectations that the Minister will pull out all stops and announce a “strong” Budget. As the Minister had himself said just before the budget announcement, the Government will do “all that is necessary” to help workers and firms.

Budget 2020 is “strong” indeed. With a historic deficit of $10.95B and a theme of “Advancing as One Singapore”, the Minister announced strong measures to help everyone affected by a slowing economy and uncertainties brought about by COVID-19.

For businesses and workers, the Minister introduced the Stabilisation and Support Package to help them through this challenging period. Despite the current challenges, the ongoing transformation of the economy needs to keep moving forward. There was a continued focus on measures to drive growth and innovation in the economy through the strengthening of partnerships with the rest of the world, support packages for start-up enterprises, measures to support domestic businesses with expansion and continued investment to increase the productivity and skills of the workforce. This is all with the intention to support the vision of a “Global Asia-node of technology, innovation, and enterprise”.

On the international front, Singapore continues to actively participate in discussions at the OECD level on a consensus-based solution for the 2 Pillars of work that would update the international tax rules. The effect of the new potential rules will need to be taken into account in the Government’s fiscal planning going-forward and consideration need to be given to how they may impact Singapore’s current tax system.

For families coping with uncertainties brought on by COVID-19, the Minister announced a Care and Support Package which includes one-off cash payments. The Minister also introduced other measures for lower-income Singaporeans, including public transport and grocery vouchers, GST rebates and more cash pay-outs.

For the public, the Minister announced that the proposed 2% GST rate increase from 7% to 9% will not take place in 2021. While a GST rate increase will eventually be necessary, the Minister has announced a $6B Assurance Package to help Singaporeans cushion the impact of the GST rise when it comes.

But that is not all—no one is left behind in Budget 2020, as the Minister announced measures to reskill our workers, support our senior citizens and even help our students gain international exposure.

So, if we had to pick one word to sum up Budget 2020, it would be “together”. The Minister’s lapel sported an ‘SG United’ badge and he stressed that it’s only together that we will overcome these difficult challenges, one by one; only together can we achieve our goals and bring about positive change, amid a turbulent future.

As the Minister aptly puts it on his Facebook page, “Together we will overcome”.

The budget commentary is provided in the following pages—Happy reading!