Singapore unveiled a bold S$11.3 billion (US$6.2 billion) stimulus package yesterday, including tax rebates and infrastructure projects, to help the city state ride out its worst recession in more than 30 years.
The measures -- which will result in a budget deficit of S$4 billion this financial year and S$1 billion in the next -- were larger than analysts' expectations of a package similar to the S$10.5 billion delivered during the Asian financial crisis.
"They have reacted strongly, I'm impressed by that. "It does not affect the outlook too much but it puts a floor under how bad things are going to be," said William Belchere, managing director of economic research at Merrill Lynch.
Singapore, with official reserves of S$133 billion, has the clout to help the economy but analysts question its ability to counter waning external demand when total exports are three times the size of its gross domestic product (GDP).
"Over the next 12 to 18 mon-ths, we can expect low growth, more retrenchments and higher unemployment," Deputy Prime Minister Lee Hsien Loong told parliament.
Singapore on Wednesday said advance third quarter data, largely based on two months of numbers, showed GDP fell 5.6 percent versus a year earlier and forecast the economy would contract about 3 percent year-on-year this year.
Singapore unveiled a S$2.2 billion package in July, before it plunged further into the doldrums as key electronics exports shrivelled and trading partners suffered slowdowns of their own.
The first set of measures also came before the Sept. 11 attacks on the US, Singapore's second-biggest market.
Among the new measures Lee detailed were:
-- Acceleration of infrastructure projects (S$3.5 billion);
-- Corporate tax rebates (S$975 million);
-- Personal tax rebates (S$650 million);
-- Increased property tax rebates (S$880 million);
-- Easing of property anti-speculation measures.
Lee said pension cuts, while a last resort, could not be ruled out as the crisis deepens.
The government -- expected to call an early general election this year -- unveiled a "New Singapore Shares" scheme worth S$2.7 billion and said it would announce details on October 16.
Analysts said the shares, which will be given to citizens, will function like a bond in which dividends are given each year until 2007 when the government redeems the shares at par or S$1.
"The timing is good when the economy is right at its weakest point. That should probably give some boost to the economy in the fourth quarter, keep it off the double-digit decline," said Paul Schymyck, an economist at IDEAglobal.com.
Singapore will accelerate 100 infrastructure projects worth S$3.5 billion over the next 18 months and cut back on the release of land to bolster the flagging economy, Lee said.
The government will also cut the wages of senior civil servants and members of parliament.
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