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On Eve of Budget 2021, It Is Clear the Economy Is Paying the Price for the Government’s Failure To Provide Enough Stimulus

In a few hours my old Cambridge colleague, the Finance Minister and Postponed Yet Again Seat Warmer PM-In-Waiting Heng Swee Keat, will be presenting Budget 2021. State media have been busy as usual doing their job of hoodwinking gullible Singaporeans and spreading fake news and disinformation. They have been trumpeting the Government’s supposed fiscal largess in generously dipping into the reserves to finance spending to shore up the economy and support hard-pressed Singaporeans. The figure most often bandied about is that the Government has allocated $100 billion to support the economy during Covid, or over 20% of GDP.

For instance, the State Times writes on 15 February:

Last year, the Government set aside a war chest of almost $100 billion – or nearly 20 per cent of gross domestic product (GDP) – to cope with the pandemic, with most of the funds used to support businesses and help workers keep their jobs.

However as I wrote in Heng Swee Keat Must Issue a Correction Notice Under POFMA to MP Ms Tin Pei Ling the real support provided to the economy is nothing like that number. This is what I said:

I am curious as to where this figure of $100 billion, or $93 billion, comes from. A comparison of the total expenditure for 2020 including special transfers but excluding transfers to endowments and trust funds (which are not current spending) versus the same figure for 2019 shows that the increase was only some $65 billion. Also the Special Transfers figure in the Unity Budget of $34 billion presumably includes the extra $13 billion which you are allocating to the Contingencies Fund, since you have not provided an updated Analysis of Revenue and Expenditure in your Fortitude Budget Statement.

If one subtracts the $13 billion allocated from past reserves to the Contingencies Fund (which may never be spent) from the total for Special Transfers (excluding Top-Ups to Endowments and Trust Funds) then total spending is only some $52 billion more than last year.

Another way of measuring the Government’s support is to look at the projected budget deficit in the Fortitude Budget Statement of $74.3 billion and subtract both the Top-Ups to Endowments and Trust Funds of 17.3 billion and the allocation of $13 billion to the Contingencies Fund. This gives a figure of $44 billion. You have already allocated $20 billion to the Jobs Support Scheme to help fund up to 75% of the wages of Singapore citizens and PRs. However given that probably more than half of the economy should be classified as being in the public sector and that a large proportion of the Jobs Support Scheme will go to Government-linked companies (GLCs) we should probably deduct half of the $20 billion as just a transfer payment from central Government to other entities in the public sector. We should also deduct $1.9 billion provided from past reserves under the Temporary Bridging Loan Programme and the Enterprise Financing Scheme shown in the Solidarity Budget since the Government is acting as a guarantor only. The final cost will depend on the loss that is left after the banks have exhausted the recovery process. The current cost of these guarantees is zero and they do not constitute actual spending.

Unfortunately your Government’s guiding principle of obfuscation and hiding the true surplus from the people means that I am forced to make assumptions. As a minimum you should publish the General Government surplus, which should include all entities in the public sector including GLCs and take account of changes in the value of all assets including land as well as the true figure for the reserves. Thus I have no idea of how much the real deficit is and am forced to guess.

A major problem is that the Government includes allocations out of the reserves (which in breach of the Constitution clearly do not appear in the Statement of Assets and Liabilities presented to Parliament with the Budget every year and which for all the useful information it provides might as well be a sheet of Lee Hsien Loong’s or Heng Swee Keat’s used toilet paper) in actual spending, regardless of whether the monies are spent or whether they are instead allocated to endowments and trust funds or placed in the Contingencies Fund.

If we estimate, based on the reasoning above, that actual additional spending (after netting off transfers to Government-owned and -linked companies through the Jobs Support Scheme) is around $35 billion then that is only about 7.4% of GDP. Even if we assume generously that actual spending was $44 billion then that is still less than 10% of GDP or less than half what the Government wants you to think it is spending.

By contrast the total amount of stimulus provided in the US has been about 18% of GDP, including the last stimulus bill of $900 billion passed before Trump left office. One of the new President’s first acts will be to pass a new stimulus package of roughly $1.9 trillion, or just less than 10% of GDP which will take total spending to over 20% of GDP. Other developed countries appear to have spent similar amounts as a proportion of GDP, though in many cases it is not clear what the amount of additional spending has been as opposed to monetary support through the central bank or loan programmes. In the case of the latter, only the actual loan losses should be classified as spending.

Since Singapore is much more dependent on external demand than the US and most developed countries (in 2020 it ran a current account surplus of $82 billion or 17% of GDP),  and trade and tourism have been hit hardest during the pandemic, the Government should have provided greater stimulus not less.

The lack of support shows in the fact that GDP in 2020 dropped by 5.4% whereas in the US GDP dropped by only 3.5%.  US GDP is expected to recover all its losses by the middle of next year whereas last week PM Lee said only that he expected the bulk of the economy to recover by the end of 2020.  Growth is forecast in the 4 to 6% range which would still mean that by the end of 2020 GDP would be slightly below what it was in 2019 if the economy grew at the mid-point of the estimate.

Rather than rein in its support, as the State Times says the Government is planning to do, we need to continue to spend at the same level or higher in 2021. I have highlighted before the low level of support which went to households compared to the amounts pumped into the Jobs Support Scheme, a substantial proportion of which is a transfer from one pocket of Government to another.

This is what I said in my earlier article:

According to your figures total direct support for Singaporeans from your Government amounted to a derisory $2 billion up to the Resilience Budget and is probably no more than $2.5 billion now. If that is divided among 4 million Singaporeans residents (citizens and PRs) that is about $620.

Contrast this with the US$3,200 or roughly $4250 in stimulus checks that will have been mailed to most adult Americans in 2020 and 2021 and US$500 per child under 16 (including the latest proposed payment of $1400). In addition Americans have received expanded unemployment benefits which have also kicked in in other developed countries (what are known as “automatic stabilizers”). By comparison, what the PAP touts as support for Singaporeans is merely the norm in safety nets and welfare payments in other countries.

The PAP Government need to stop treating the reserves as their own personal treasure that must be hoarded and not spent. As I have said before, they are not operating a mama shop with a profit and loss ledger, however much Lee Hsien Loong and his wife have awarded themselves the positions of towkays who control the country’s wealth. Unless Budget 2021 continues the previous level of support and provides much more generous assistance to Singaporean households it will be a failure. We will all pay for it in terms of lower growth and higher unemployment than there needs to be. Unfortunately the lessons of Keynes and Modern Monetary Theory, though becoming mainstream in the US, have not been learnt by Heng Swee Keat and Lee Hsien Loong. Heng should return to his alma mater, Cambridge, for a refresher course.






  1. Brilliant! It will do our Citizens good to understand this. You probably need a great team of savvy digital social media influencers to help you.

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