Budget 2021: Singapore may need to dip further into reserves to invest in future economy

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SINGAPORE – Should the public health and economic situations deteriorate and the need arises, the Singapore Government will seek President Halimah Yacob’s consideration for the use of past reserves to support economic investments to ensure the Republic emerges stronger from the crisis of the Covid-19 pandemic.

Deputy Prime Minister and Finance Minister Heng Swee Keat said this in Parliament on Tuesday (Feb 16) as he noted the need to sustain investments in Singapore’s future economy.

“How we recover from Covid-19 in the next few years is critical,” he said.

“It will determine our nation’s long-term success. Beyond dealing with its immediate impact, we are making significant investments to position Singapore for our next bound of growth in the post-Covid-19 world.”

Singapore’s past reserves comprise assets invested by its central bank, the Monetary Authority of Singapore (MAS), as well as state investor Temasek Holdings and sovereign wealth fund GIC.

Since the onset of the coronavirus situation, Madam Halimah’s approval has been obtained to draw on a total of up to $53.7 billion from the reserves. Before that, the President’s approval was last sought during the 2009 global financial crisis.

Mr Heng noted that Covid-19 has disrupted business models and global supply chains while accelerating trends like digitalisation.

“To secure our future, it is crucial for us to seize opportunities in new growth engines, respond to structural trends, and transform our economy. We will invest strategically in these areas over the next few years,” he said.

Aside from measures announced in Budget 2021, others are being developed by the Emerging Stronger Task Force set up to guide Singapore’s economic recovery from Covid-19; various industry-led partnerships with the government-dubbed Alliances for Action; and other agencies.

Said Mr Heng: “Based on the current outlook, we expect that as the economy recovers, we will be able to balance our budgets, and our revenues will be able to support projected expenditure for these measures.”

This assessment assumes the global Covid-19 situation would come under control by 2022, he cautioned.

“We have carefully thought through the different scenarios. While we expect economic recovery in Singapore and globally, there is a wide cone of uncertainty,” Mr Heng said. “Even if the economic and fiscal situation turns out to be worse than expected, we must still press on to invest in new areas, so as to ride on the structural changes, transform and emerge stronger as an economy, and as a people.”

He shared that Madam Halimah had been briefed on the Government’s strategy and contingency plan in the event of a prolonged economic impact of the pandemic.

The President has expressed her understanding of this approach, said Mr Heng, and will consider the Government’s specific proposals should there be a need to draw on past reserves.

Read more on Budget 2021 from ST’s live coverage here.