In my analysis of Budget 2021, I criticised Heng Swee Keat’s failure to provide enough stimulus and warned that SIngaporeans would pay the price. I said that while Heng projected a Budget deficit of $11 billion for FY2021, the reality was that the Government was running an enormous surplus because the Net Investment Returns Contribution represented less than half of the long term real returns made by GIC, Temasek and MAS.

In a follow up analysis, Heng’s Desperate Attempts To Deceive Singaporeans End Up Revealing Enormous True Size of the Reserves,I pointed out that working backwards from the extremely conservative and deliberately misleading methods used to calculate the Net Investment Returns Contribution, which do not conform to the IMF standards for calculating the Budget deficit nor make any sense to an economist, the level of hidden reserves was likely of the order of $2 trillion, in addition to the level of assets shown in the annual Statement of Assets and Liabilities..

As a result of the Government’s failure to provide sufficient help in 2020 and its determination to remove the inadequate aid provided to Singaporeans as fast as possible, the economy ended the year 5.5% smaller than in 2019 and GDP was forecast to only regain its 2019 level by the end of 2021. Our growth is lagging behind the US, where the incoming Administration quickly enacted an additional US$1.9 trillion of stimulus and is looking to pass an additional US$4 trillion of spending, and even the UK. It is true that manufacturing is performing better than expected, largely because of the huge addition to external demand provided by the additional US spending, but manufacturing largely employs foreign workers. Relying on external demand while curbing domestic demand through high regressive taxes (GST), inadequate social safety nets and enormous forced savings (CPF) is not going to work in the future. Singapore’s policies are similar on a smaller scale to those of China, Germany and Japan and the US has grown increasingly tired of running trade deficits to enable these countries to have adequate growth.

No doubt Heng, the PM and the PAP leadership were complacently congratulating themselves on having weathered the COVID-19 storm and looking forward to coming out the other side. Certainly they seem to have completely dropped the ball over the Indian variant and allowed it to enter Singapore by not closing down the borders with India early enough and then allowing passengers from these areas to transit through Singapore while failing to insulate the local workforce from them or ensure their vaccination. The Government has also failed to adequately plan to get most Singaporeans vaccinated with the result that Singapore now badly lags behind Western countries, let alone cities, and is having to belatedly lengthen the gap between vaccinations to ration supplies, despite being a vaccine manufacturing centre.

With the number of COVID cases rising again and Singapore going into a new lockdown in all but name, the Government urgently needs to enact new stimulus measures to prevent more retail businesses failing, in addition to the inadequate extension to 50% under the Jobs Support Scheme given to F&B businesses for the duration of the lockdown. In my Budget analysis on behalf of the Reform Party I said “Reform Party would provide a stimulus payment of $1500 to every Singaporean citizen adult and $500 for each child under 21. There are about 3.5 million Singapore citizens of whom about 750,000 are below the age of 20. We estimate the cost of this at about $4.5 billion of which at least 10% will be recouped through higher taxes such as GST.” In light of the deteriorating economic situation this payment should be doubled, with half being given now and the remainder in six months.

Unfortunately the PAP Government are unable or unwilling to grasp the enormity of the situation so this is unlikely to happen. Instead Singaporeans will be treated to more homilies about the need to maintain and replenish the monies spent from the reserves when the truth is that the reserves probably grew to a record level last year despite the claimed high level of spending. The level of economic understanding of the PAP leadership  seems to be stuck somewhere pre-Keynes and the Great Depression. Singapore is not a family-owned business, where the ledger and balance sheet needs to be carefully safeguarded and handed on from one generation to the next, while the current generation of Singaporeans suffer under unnecessary austerity, even though LHL and his wife believe it be.

Published by kjeyaretnam

I'm a Singaporean economist who became an opposition activist. I blog to provide an alternative to the porkies that the Pinkies tell. It just so happens that my alternative is the truth. That's why I've never been sued in any civil or criminal court no matter how hard hitting my criticism. I'm quoted and interviewed and asked to speak across the world but largely censored in Singapore in an effort to silence my political opinions. The left hate me because they think I split their vote and because I eschew their outmoded economic models. Models that don't work. The Right and the Conservatives hate me because I'm a liberal. I'm not sure what the middle think of me. I don't think there are more than a handful of people in the middle, here in Singapore. I'm a Singaporean born and bred, dual heritage, my parents Singaporean established here before the State of Singapore was created. I'm not Eurasian. I read economics at Cambridge and could be broadly described as from the Keynesian school but I believe in interventions. I was formerly a successful hedge fund manager. After economics and politics my greatest interests are history, film and Makan. I run but I run so I can eat like a Singaporean. View all posts by kjeyaretnam