Fiscal deficit to hit two decade-high in 2020

The economic effects of the COVID-19 outbreak demanded a much bigger stimulus.

Singapore is projected to see the worst fiscal deficit in two decades at 2% of the GDP, as the government is expected to roll out a significant stimulus in the FY 2020 budget to soften the economic effects of the COVID-19 outbreak, according to a commentary from ING.

Taking cue from the SARS stimulus package, the package is expected to contain some income tax relief for both individuals and corporates, as well as target reliefs measures for tourism and retail sectors.

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It may also include incentives for small and medium-sized enterprises (SMEs) to stay afloat without having to downscale, and some boost to real estate via rollback of some earlier tightening, besides initiatives supporting tech innovations.

After years of fiscal surplus, the government has already flagged a growth-friendly budget for the economy already dragged by trade uncertainties and tech slump. “And now the added whammy seems to have paved the way for a much bigger stimulus,” said ING economist Asia Prakash Sakpal.

The impact of the outbreak is noted to mainly flow through tourism and trade. Already, the authorities are expecting a 25-30% plunge in visitors this year.

ING expects GDP growth to hit 1.0% in 2020, although this hinges on the economy receiving fiscal support.