On the one hand, the health workers are worried about the spread of the virus, the business owners and the experts, on the other, are concerned about the aftermaths of the pandemic. It is no more news that COVID-19 is going to fiddle with the economic conditions of all the countries in varying proportions. Some countries like Italy, Spain, and India, have locked down their economies to control the spread, or ‘flatten the curve’ as they say; geared up to face the oncoming hard times. And then there are countries, like the USA and Vietnam that are trying very hard to save themselves from the virus, and aren’t considering any lockdown plans.
Singapore joined the lockdown club and introduced a circuit breaker plan on the 7th of April to curb the spread of the virus. The government announced a solidarity budget and advised the Singapore nationals to stay indoors and only go out if unavoidable. The government has also created an exhaustive guide on what is legal and what is not under the new temporary laws for controlling the disease.
Why did Singapore lockdown itself?
Singapore has always been a pro-active agent. The pandemic was yet another opportunity where Singapore displayed how its approach, backed by technology, can be used to control the disease. Initially, the country was able to manage and contain the spread of the virus and take appropriate measures where required. As a result, Singapore allowed its businesses to work freely. But, the rise in the community spread and now in foreign workers community in the last few days, forced Singapore to take stricter action. On Apr 3, Prime Minister Lee Hsien Loong called for closure of non-essential services, ban on the public gatherings, and suspension of every kind of movement that is not critical for living.
Singapore is highly dependent on the world economy, thanks to the nature of businesses, the country felt the heat of COVID-19 in the economic terms well before the lockdown happened. The tourism, insurance, logistics, and automotive industry came to an instant halt. The demand fell drastically, and the businesses forced to get defensive. The circuit breaker plan that will be in place until May 4, 2020, is adding to the worries of the businesses even more.
SO, what exactly is Singapore doing to save the economy?
The government has released a stimulus package to negate the impact of coronavirus on the economy. The package worth S$59.9 billion got released in the form of Unity Budget 2020, Resilience Budget 2020, and then Solidarity Budget 2020. All three budgets geared towards enabling the businesses to stay afloat in the current scenario.
The budgets are aimed primarily at helping the individuals and companies that are profoundly impacted by the spread of COVID-19. The budget, as stated by the government, will focus on 3 C’s that are very critical for the businesses:
- Cash flow
S$9 billion will be disbursed to the public of Singapore in the month of April. While the rest will be given as aid by the end of the month of April 2020, and the subsequent months.
How Exactly the Budget(s) Will Help?
The budget can be divided into three parts: the budget for households, salaried employees, and self-employed individuals.
The government had earlier proposed $100, $200 and $300 as a support relief to everyone affected by the pandemic. After the two budgets, this limit has been increased to $300, $600 and $900. The government has also frozen all the payments that people had to make towards repayment of the university or polytechnic loans for a year, and late payment charges for HDB mortgages for 3 months. These changes will enable the people to survive the pandemic without having to worry about money for groceries, medicine, and other essential services. To make the lives of the people even more comfortable, the self-help groups and the community development councils will receive assistance in the form of a package of $20 million and $75 million over 2 years, respectively.
For those under the Workforce Income Supplement Scheme (WIS), the special payout has been increased to $3000. This amount will be dispersed in 2 installments of equal amounts. For the employers, the government’s share in the worker’s wage has been set at 75% across all sectors. It has been covered under the Jobs Support Scheme, Union Budget 2020. The scheme will also be extended to the end of this year. Additionally, self-employed individuals will receive $1000 per month for the next 9 months under the Self-Employed Person Income Relief Scheme (SIRS). The funds will enable the workers to keep their jobs and decrease the pressure on the companies.
Just in case the companies have to let people go, the government has set-aside a COVID-19 Support Grant to provide relief in the form of $800 per month for people who lose their job amid pandemic. However, there are a few conditions that the individuals will have to meet to benefit from this fund. More on this can be found here.
For business owners, the relief has come in the form of delay of income tax payments to July and August for companies and self-employed individuals, respectively, and rebate in property tax of up to 100% for qualifying properties. More on this can be found here. Hawkers will receive a rental waiver for 3 months commercial tenants in a government building for 2 months, and other non-residential tenants will have it for 1 month. These measures are aimed at helping the businesses in maintaining healthy cash flow in the time of the cash crunch.
The government has also planned separate strategies to revive the aviation, tourism, transportation and art and culture. These industries have been severely affected by the pandemic, and there is no practical solution to bring them back to normal. Moreover, these industries employ a large number of people and hence need to be saved from any kind of failure. The government is planning to pump the funds and support schemes to these sectors in a planned way and keep them alive for a few months until things get normal.
But, the REAL Question – Will This Work?
Many big countries are currently working on experimental drugs and vaccines. However, there is no deadline as to when all of this will end. Singapore, like any other country, is hoping that the massacre caused by the coronavirus will end, or at least come under control in the next 3 to 6 months. Therefore, the country has planned to utilize funds in the best way possible to save everyone from the disease and the financial crunch. However, there are two big aftermaths that the coronavirus will leave on the world – a weaker financial immune system, and uncertainty in the job market immediately after COVID-19 gets over.
Risk in the Job Market
Unlike a decade ago, when the recession hit the world last time, this time, it will be due to the fall in demand. The global supply chain has been disrupted, and tourism has come to a halt. In the last 1 month, more than a hundred countries have closed their borders – an event that the world has never seen, ever. But, does closing of borders impact tourism only? No! The movement of human resources, material, and money is also impacted. It impacts Singapore in a significant way. The ports of Singapore act like a link between the east and the west. Much material flows through these ports, and much money comes in through this movement. With a weak and less logistical change in the world, the ports are losing money. The impact can be powerful enough to kick start a domino effect in the country, leading to a highly abusive job market situation.
As per some experts from Moody’s, the world should brace itself to face not one but four waves of economic pain, that have the power to push the world into depression. The first wave or the sudden stop is what we are facing right now – a sudden stop in the economic activity, viz-a-viz. The factories are at a halt, restaurants are shut, people aren’t traveling, and even e-commerce is shut. The next wave will be the result of the first wave – the loss of jobs. When people do not spend money, the GDP goes down, and people lose jobs.
The third wave will affect the people who thought that they had made the right investments. With a weakening economy and money moving out of the system, people will be forced to rethink their retirement plans. The stock markets will crash, purchasing power will decline, and thus worsen the job market. The fourth wave will affect businesses. Corporates will have little money at their disposal. Starting new factories will be a challenge. Launch of new products will be halted. What makes the whole situation scary is the fact that the world is already facing the first wave.
Weaker Financial System
The third and the fourth wave are going to fiddle with the survival and expansion plans of the businesses. Most of the companies have already hit the panic button and started working on a business continuity plan to keep themselves afloat.
The airline business is one of the worst affected industries in the world. Even without the pandemic, the airlines were pleading the governments for bailouts. The hotel chains, tourism, restaurants, and entertainment industry will take a hit as well. People will not be ready to venture out into the public, and social distancing will make things worse. Some reports even suggest that the manufacturing, luxury, and apparel industry will take a hit as well. With the fall of such enterprises, supporting sectors that act as suppliers to the big brands will start collapsing.
All this translates to weaker demand, and an even more fragile financial system to support the economy. However, the surge in the usage of products like Zoom is a good sign that people are working from home and trying to save jobs and companies. But, how much of this effort will convert to success is a question that only time can answer.
Coming Back, if a Relief Package Can Save Businesses in Singapore
Singapore forms a significant part of the world economy. The country has attracted talent from around the world and given them the freedom and environment of growth. Due to this, the country is now home to a big start-up scene that supports several big corporates around the world, especially in the finance, automation, and knowledge sector. Therefore, one needs to look at the Singaporean economy in resonance with the world economy as a whole. Because it is the world that generates demand for Singaporean businesses.
The world is going into a cold age of recession. However, if experts are to be believed, the situation can be avoided if humanity can fight the virus by next month (i.e., May 2020). In case this happens, the world might witness a “V-shaped” recession, which means that the world will bounce back as quickly as it sinks. The countries, like Singapore, which have managed to create a COVID-19 fund for their people, will be able to come back into action pretty quickly and get back on the path to progress.
The funds will minimize the impact on the spending power of the consumers. Businesses will have to spend a minimum amount of money and time on recovery plans. Self-employed individuals will have enough money at their disposal to restart their businesses. Hawkers and other commercial tenants will not have wasted any money on paying rents for the months when the market was nil.
However, the ‘worst’ waits for everyone if the pandemic is not brought under control by summer. In such a situation, the economies are bound to fall apart. It will not be just Singapore that will face the axe; instead, the axe will fall on the entire world as a whole. There are also fears of permanent loss of wealth and business knowledge. What adds more fear to the situation is the fact that while the world understands cyclical unemployment, this will be something new – an army of unemployed skilled workers who are not ‘allowed’ to go out and work. It will be unlike 2008, or even 1930, the great depression. There will be no research or study to refer to, and the world will learn a new lesson in a very harsh way.