Past Support Measures Helped Avert A Deeper Recession

As governments around the world moved to contain the COVID-19 virus by imposing lockdowns and shutting down businesses, the Ministry of Finance (MOF) had to quickly adjust last year’s five budgets.

By adjusting to the crisis, Singapore avoided a deeper economic recession and prevented its unemployment rate from skyrocketing by another 1.7 percentage points.

The recession caused by a pandemic is the worst Singapore has faced since independence, Deputy Prime Minister Heng Swee Keat said.

Singapore’s GDP contracted 5.4% in 2020.

The overall fiscal deficit for fiscal 2020 is also the largest since Singapore’s independence, at $ 64.9 billion, or 13.9 percent of GDP, Heng said.

He added that nearly $ 100 billion, on top of the usual spending, was committed last year through five budgets to support Singaporeans, help businesses recover and keep everyone safe.

Mr Heng said that last week, an interim assessment released by the finance ministry showed that the combination of fiscal, monetary and transitional measures had helped avert a worse recession, avoid job losses and alleviate the inequality.

For example, without fiscal and monetary policy measures, Singapore’s GDP would have declined by at least 12.4%, more than double the recorded contraction (5.4%) in 2020.

The measures also helped save or create around 155,000 jobs on average between 2020 and 2021, preventing resident unemployment from rising by a further two percentage points last year.

Economic recovery remains uncertain

The global battle against Covid-19 is far from over, and many places still experience high levels of infection, Mr Heng said.

The recovery in global economic activity is expected to be long, highly uncertain and uneven across sectors and geographic areas.

The uncertainty of the economic recovery is compounded by rising protectionism across supply chains, resources, data and technology, as well as unprecedented levels of public debt around the world to fund extraordinary fiscal responses amid of the pandemic.

As a small open economy, Singapore’s economic recovery depends on how the global situation evolves, and the country must adapt nimbly to the wide range of possible outcomes.

He called on Singaporeans to build a stronger, economically vibrant and socially cohesive Singapore, a welcoming home that is green and sustainable, and has the fiscal and social reserves necessary to enable continued stability and progress.

Featured Image Credit: MCI

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Jothi Venkat

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