SINGAPORE (Reuters) - Singapore on Tuesday announced around $4.5 billion in financial packages to help contain the coronavirus outbreak in the city-state and weather its economic impact, paving the way for its biggest budget deficit in at least 15 years.
The wealthy city-state, one of the countries outside China hit hardest by the virus, has already cut its economic growth outlook this year and flagged the possibility of entering recession.
As the island nation prepares to hold an election due by early next year, the government also said in its annual budget that a planned hike in the goods and services tax would not take place in 2021 given the economic uncertainty.
“The outbreak will certainly impact our economy,” Finance Minister Heng Swee Keat said. “We will put in every effort to slow down the spread of the virus.”
Other budget highlights included an S$8.3 billion multi-year scheme to help Singapore become a global hub for tech firms, a S$5 billion fund to protect the island’s coasts from rising seas, and a plan to phase out petrol and diesel vehicles by 2040.
It also said it would set aside S$6 billion to help households offset an eventual rise in goods and services tax due by 2025.
The virus package involves S$800 million ($575 million) to fight and contain the disease, mainly through healthcare funding, and a further S$5.6 billion ($4 billion) in economic stimulus measures to manage its impact on businesses, jobs and households.
The economic measures include support for businesses to manage wage bills, corporate tax rebates, schemes to help firms in the hard-hit tourism and aviation sectors and cash payouts for households to manage expenses.
The government is budgeting for an overall budget deficit of S$10.9 billion, or 2.1% of GDP, in FY2020, the highest since at least 2005 - the last year covered by the government’s statistics website. It estimated a deficit of S$1.7 billion, or 0.3% of GDP, in FY2019.
Singapore tends to be conservative in its fiscal forecasts. During the 2009 financial crisis, it forecast a S$8.7 billion deficit, but the actual shortfall was just S$819 million.
The Southeast Asian city-state has reported 77 cases of coronavirus and was also one of the worst hit countries outside of China during the 2003 Severe Acute Respiratory Syndrome outbreak.
“The impact of COVID-19 is probably going to be bigger than SARS because China was relatively less important to Singapore’s exports and tourism,” said Lee Ju Ye, an economist at Maybank, referring to the disease’s technical name.
“Now, it’s hitting the global supply chain and Singapore’s manufacturers are going to feel the heat.”
The economic fallout from the coronavirus epidemic has spread to U.S. technology titan Apple Inc (AAPL.O), which warned of iPhone shortages and lower than expected revenue, while South Korea’s president called the situation in his country an economic emergency.
Reporting by John Geddie, Aradhana Aravindan, Fathin Ungku and Anshuman Daga; Editing by Simon Cameron-Moore