Singapore Budget 2020: Outlook to Outlast the Outbreak Outreach

On 18 February, Singapore’s Finance Minister, Mr Heng Swee Keat, delivered his Budget speech for 2020. This budget came amidst the outbreak of COVID-19, declared by the World Health Organisation as a global health emergency, leading to greater uncertainty in local and global market conditions.

19 Feb 2020

Singapore Budget 2020   Outlook to Outlast the Outbreak Outreach
On 18 February, Singapore’s Finance Minister, Mr Heng Swee Keat, delivered his Budget speech for 2020. This budget came amidst the outbreak of COVID-19, declared by the World Health Organisation as a global health emergency, leading to greater uncertainty in local and global market conditions. Till date, authorities have raised the Disease Outbreak Response System Condition (DORSCON) to Orange.

Latest statistics on the economy registered 0.7% growth in 2019, a decade low. The growth outlook is expected to be further clouded by COVID-19, with the Ministry of Trade and Industry (MTI) revising growth to come in at around 0.5%, the mid-point of an estimated range of -0.5% to 1.5%. The previous forecast range announced last November was 0.5% to 2.5%. Prime Minister Lee Hsien Loong has warned that the ongoing COVID-19 outbreak will have a significant impact on the local economy for the next couple of quarters, with a possible recession.

Fortunately, with three consecutive years of surplus preceding this budget, the government could afford to dole out a more generous package to help Singapore deal with this unfolding pandemic and its repercussions.
From his speech, some key policies that may have an impact on real estate include:

Rental waivers

NEA will provide a full month of rental waiver to stallholders in NEA-managed hawker centres and markets. Other Government agencies, like HDB, will provide half a month of rental waiver to its commercial tenants, said Mr Heng.

For qualifying commercial properties, there will be a 15% tax rebate, which Mr Heng urged landlords to pass on these savings to tenants.

Boosting Consumption

The GST rate increase will not take effect in 2021, and will remain at 7%. However, the increase will happen by 2025, and when it happens, there will be a $6 bn package to help Singaporeans cushion this increase. To help workers stay employed, the government will support enterprises by defraying their wages cost through two schemes: the Jobs Support Scheme and a special Wage Credit Scheme.
A Care and Support package amounting to $1.6 bn in the form of cash payouts, rebates, and vouchers will be distributed to households and seniors, to help them deal with expenses such as groceries and conservancy charges. In addition, every Singaporean aged 21 and above will receive a one-off $100 to $300 cash payout in 2020, dependent on their income.

Supporting Corporates

Mr Heng introduced a Stabilisation and Support Package worth $4 bn to help stabilise the economy and support workers and enterprises. The tourism, aviation, retail, food services and point-to-point transport services, which are directly affected by the COVID-19 outbreak, will get additional support.This package includes a Corporate Income Tax Rebate for year of Assessment 2020 at a rate of 25% of tax payable, capped at S$15,000 per company. This rebate will benefit all tax-paying companies and cost S$400 mil, putting more cash in the hands of Singapore's enterprises.Further, $300 mil will be set aside under Startup SG equity to catalyse investments in deep-tech start-ups.

Dealing with Climate Change

As mentioned in the 2019 National Day Rally, the government will set up a Coastal and Flood Protection Fund with an initial injection of S$5 bn and top it up whenever the fiscal situation allows. Further, another $1 bn will be committed forresearch into Urban Solutions and sustainability. The HDB Green Towns Programme was also introduced to focus on reducing energy consumption, recycling rainwater, and cooling HDB towns. These measures are to deal with climate change, as well as the existential threat of rising sea levels.

Key Takeaways

Overall, this Budget is expected to register a deficit of $10.9 bn (the biggest deficit in a decade), to cushion the COVID-19 fallout. However, it was structured with broad based measures that are more long-term to address the structural changes (e.g. enhancing the workforce, addressing climate change) in our economy, rather than merely focussing on the virus breakout. Some of the measures aim to shore up consumer spending as well as provide support to commercial landlords/occupiers in Singapore. In addition, tax rebates will take some pressure off corporates to tide them over this period.

Due to the uncertainty of the impact of COVID-19, CBRE Research will not be surprised that off-budget measures could be implemented, should current rebates be deemed insufficient.

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