Singapore, 22 Jan. S$20.5b (US$15b) might not sound like a lot of money in these days of trillion dollar collapses, but when it represents 6% of GDP (estimated at US$227b in 2007), then it becomes one of the most aggressive stimulus plans on a per capita basis in the planet.
It is also includes some creative elements. The Singapore Budget 2009, announced today, was billed the Resilience Package. Since Singapore is one of the most open economies on the planet, relying heavily on exports and financial markets, it was one of the first Asian countries to officially enter recession by the third quarter of 2008. Indeed GDP in Q4 2008 fell at the dizzying annualised rate of 16.9%. The country has just revised down its 2009 GDP growth forecast to between -2% and -5%, which would be its worst performance since independence more than 40 years ago. As a result it is dipping into its considerable national reserves for the first time.
Singapore Budget 2009 with its Resilience Package can’t do that much to boost domestic consumption, and so its focus is on keeping employment levels as high as possible while minimizing business failures. S$4.8b are being drawn from reserves to fund the Jobs Credit and Special Risk-Sharing Initiative.
The key elements of the Singapore Budget 2009 are:
- Jobs Credit. Companies will receive a 12 per cent cash credit against employee salaries, up to a salary of $2,500 which is the median income. This is paid out at the end of the quarter for all preceding months that an employee was salaried.
- Skills Upgrading and Resilience (SPUR), The government will pay 90 per cent of retraining fees, as well as an hourly lost productivity rebate, to keep employment while new job training takes place.
- Workfare Income Supplement (WIS). Supplements the wages of low income earners – the supplement will be increased by 50 per cent.
- Corporate Tax main rate is being dropped from 18 per cent to 17 per cent, with the effective rate estimated at 15 per cent.
- A 20 per cent personal tax rebate will be applied for the current year of assessment
- A 40 per cent property tax rebate will also be applied
- S$4.4b will be spend on infrastructure, health and education improvements
These moves in sum should help Singapore to continue to improve its positioning as the Asian country with the lowest tax rates, most supportive government, and best educated workforce. The government of Singapore may well have turned the crisis and its resulting Resilience Package Budget from a problem to a great opportunity.
Nobby Solano, EconomyWatch.com