SINGAPORE – Singapore’s Finance Minister Tharman Shanmugaratnam announced a $20.5 billion plan to encourage spending, save jobs and cut taxes in order to help deal with what is expected to be the worst-ever recession to ever hit the country since independence.
In a televised speech on Thursday, details of the plan termed as the “Resilience Package”, were announced. Of the $20.5 billion Resilience Package, $4.9 billion will be tapped from the country’s reserves, an unprecedented move given that Singapore has resisted calls previously to use the reserves and weathered earlier crises.
However, the Budget deficit for this year is projected to be the biggest in absolute terms ever since 1965. As an indication of its sheer magnitude, the projected Budget deficit is more than double the $2.698 billion dollar deficit the country suffered as a result of the 2001 dot.com crisis. Yet, in relative terms, Singapore has suffered a greater Budget deficit in 1986, when its $2.5 billion deficit was roughly 6.3 percent of the GDP.
A major part of the Resilience Package will be geared towards helping companies save jobs. Close to 120,000 employees will now receive subsidies from the government for its expenditure on wages, with plans in place to subsidize the first 12% of the first $2,500 of each employee’s monthly salary.
With Singapore’s economy being small and very open, the government has also embarked on a Keynesian strategy to tackle this recession. As the biggest employer in the country, the government plans to create another 18,000 new jobs in the civil service sector in the next 2 years in order to cushion the expected layoffs and entrance of a protracted 60,000 local graduates in this time period.
Many fresh graduates are expected to seek employment in the civil sector, which promises a generally better starting pay than the private sector, and obtain working experience before moving into the private sector.
In line with this, the government has recently became more flexible in its hiring policies, employing civil servants on a contractual basis of a period of 2 years. This has also shattered the myth of an “iron rice bowl”, which many Singaporeans attribute to the long-running and stable nature of civil service jobs.
Echoing this, Ong, a 21-year old political science student, said: “Many of my friends are thinking of becoming teachers or entering the civil sector when they graduate. This would give them the experience needed to succeed in the private sector,”
“Moreover, the civil sector is able to meet the salary demands of many fresh graduates. Not many would be willing to settle for a pay that may be remarkably lesser than their expectations, even in this recession,” she added.
Optimism in this recession
Still, are we scaring ourselves too much in this recession?
As a result of the Asian economic crisis of 1998, the government had anticipated a $5 billion budget deficit for the financial year of 1999. However, the economy recovered swiftly to report a budget surplus of $4.9 billion. Professor Danny Quah, head of the Economics department at LSE, is one of the economists who has encouraged optimism in the face of this recession.
He has a point. Although not many are expecting a V-shaped recovery in this recession, the Singapore economy needs us to spend and not save in order to tide ourselves across this difficult period. A climate of fear must not dominate our spending habits, and although it is wise to be frugal in our expenditure during this recession, we must not hold ourselves back too much out of an excessive amount of apprehension.
And while other countries may have to borrow in order to deal with a Budget deficit, Singapore does not. Despite the diverse challenges that continually surface, Singapore has proven itself to be flexible and strong enough to deal with them. Investments in the gambling, arts and biomedical industry together with the recent staging of a very successful F1 night race demonstrates the willingness of the country to liberalize, change, adapt and re-invent itself in order to remain relevant.
There is sufficient reason to be confident that we can weather this crisis, no matter how bad it will hit us, and we must continue to believe.