On 22 January, the Minister for Finance unveiled a substantial budget spending to the tune of S$20.5 billion in 2009 to cushion the impact of the economic crisis affecting Singapore.
The Resilience Budget for 2009, as it is called, is to help businesses to reduce business costs so that they can keep afloat and continue to retain employees instead of retrenching them. This is done through providing cash grants known as Jobs Credits of 12% of first $2,500 of wages of each employee on the businesses’ CPF payroll. In addition, the government is getting the credits and loans flowing to businesses again through Special Risk-Sharing Initiatives (SRI) where the Government will share 80% of loan losses with the banks bearing the rest for the New Bridging Loan Programme.
The above are extraordinary measures not seen before. There are also other budget measures:
- corporate tax will be cut by one percentage point to 17%
- 40% property tax rebate to landlords of commercial and industrial properties
- 20% personal tax rebates capped at $2,000
- 40% property tax rebate for owner-occupied residential properties
- double the GST credits given to families
- public sector construction spending between $18 billion to $20 billion this year; another $1.3 billion worth of government projects will be brought forward
Despite the announcement of huge budget spending yesterday, the Straits Times Index (STI) lost 1.38% to 1,685 points today, the last day of trading before Singapore Exchange took a break for the Chinese New Year (CNY).
In previous years, there used to be CNY rally leading up to the actual CNY celebrations. Both the CNY and Resilience Package 2009 did nothing to push up the STI this time round. In fact, the STI was down 76 points (-4.3%) since 31 December 2008.
Singapore economic expansion is heavily dependent on external demand for her goods and services. 85 per cent of economy is external demand-driven. If the global demand does not pick up, Singapore will not recover on its own. Analysts and fund managers know about this and hence the STI was not rallying despite so much money being planned to be spent for 2009.
The Minister for Finance professed that he did not know when the recession will end. It may last longer than this year. Even when the recession is over there will be a number years of weak GDP growth. It does not sound upbeat at all moving into the Year of the Ox.
Written on 1/23/2009 10:20 PM
Copyright © 2009, the author known as LKT in Singapore.
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