SINGAPORE: Singapore on Tuesday announced around US$4.5 billion in financial package to help contain the coronavirus outbreak in the city-state and weather its economic impact, paving the way for its biggest budget deficit in over a decade.
The 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.
The wealthy Southeast Asian island, which is due to hold an election by early next year, also announced in annual budget that a planned hike in the goods and services tax would not take place in 2021 given the economic uncertainty.
"Just as the global economy was beginning to recover, the coronavirus...outbreak hit us," said Finance Minister Heng Swee Keat said. "The outbreak will certainly impact our economy...Our first concern is to protect you and your families.
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 is also setting aside S$6 billion to help households offset an eventual rise in goods and services tax due by 2025.
The virus package involves setting aside S$800 million (US$575 million) to fight and contain the disease, mainly through healthcare funding, and a further S$5.6 billion (US$4 billion) in 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, according to official figures. 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 US technology titan Apple Inc, which warned of iPhone shortages and lower than expected revenue, while South Korea's president called the situation in his country an economic emergency.