SINGAPORE: Singaporean Prime Minister Lee Hsien Loong sees the government running a budget deficit at least until early next year, and possibly longer, as the coronavirus-hit economy discourages the traditional fiscal wisdom of the city-state.
The next budget is in February. “I doubt very much that we will have any budget surpluses by then,” Lee said in an interview with Bloomberg Editor John Micklethwait at the New Economic Forum, which took place roughly this year.
“I hope we can return to wisdom and a balanced budget, but it may take some time.”
Governments globally have spent trillions of dollars this year fighting Covid-19 and its effects. Singapore was among the first in Asia to unveil massive stimulus, and in March it sought to tap into its national reserves for the first time since the global financial crisis.
In total, the government has pledged about 100 billion Singapore dollars through five aid packages to stop the virus and hit the economy, about half of which have been approved to be funded from past reserves.
The latest estimated balance for fiscal year 2020 is a deficit of SGD 74.2 billion, according to government figures in October.
Lee defended the need for deficits, saying in the interview published on Tuesday that “only from a countercyclical viewpoint, you don’t want to have a negative fiscal impulse” and instead you should spend to keep people in jobs or support them through unemployment.
His comments echo calls from the International Monetary Fund – Usually a supporter of budget control – To set aside debt concerns for now and increase public spending to stimulate economies.
Lee, 68, said Singapore was still in the middle of a crisis and confirmed that he plans to leave his post as soon as he can “hand it in good shape”, which he had hoped would be “too long” before.
Before the pandemic, he told me he was aiming to step aside by the time he turned 70.
David Sandison, head of taxation at Grant Thornton Singapore Pte Ltd, a business consultant, said that while Covid has pushed the massive spending, it won’t be easy to find ways to offset those costs with higher revenues.
He said that “gradually lower debtor-state taxes” and incentives were a big pull factor for companies, and remain so especially at a time when many economies are looking inward.
As for industries like aviation, tourism and entertainment, “It is better for me to take care of it and keep these sectors in suspended animation mode, rather than risk reviving them before we are ready to deal with the consequences and after that we have another major outbreak of Covid virus,” he told me.
At the same time, I added that it must be “deeply rooted” in Singapore that reserves are not “infinite” and “we have to earn our reserves.”
“We have to deal with public health and economic requirements in the short and medium term, but one day this will pass as well,” he said. “And when that happens, we must make sure that we can return to the habit of balancing our budgets.”
The Southeast Asian country is looking to further ease the epidemic restrictions as it tries to summarize more economic and social activities. Singapore has brought the virus under control to a large extent, with daily new societal cases hovering around or near zero for the past few weeks.
Officials said it may be possible to enter a third phase of easing virus restrictions by the end of the year, which is the stage in which the country will remain until an effective vaccine or Covid-19 treatment is developed.
Singapore is in discussions with Pfizer Inc, along with several other pharmaceutical companies, and is pursuing a wide and varied vaccine portfolio for its residents.
“I doubt we’ll be the first, but we don’t want to be the last,” he told me, speaking of whether it would be difficult for smaller countries to secure vaccines. “The big countries have made sure they are first on the waiting list, sometimes through very comprehensive procedures.”