COVID-19: Second stimulus package might require a bigger draw down on reserves than in 2009

Victor Kang25 Mar 2020

People walking past Singapore's financial district

The second stimulus package may even exceed the record $20.5 billion package introduced during the 2009 global financial crisis, economists say. 

Ahead of the government’s second stimulus package announcement, which will be unveiled on Thursday, 26 March, economists expect it to surpass the special packages rolled out in Budget 2020 and even exceed the record $20.5 billion package introduced during the 2009 global financial crisis.

With the second stimulus package estimated to hover between $14 billion and $33 billion, the government may have to tap on the city-state’s past reserves, subject to the President’s approval – making it only the second time for Singapore (the first was in 2009, when about $4 billion was drawn down from past reserves), reported Today.

With a larger supplementary budget, this would mean that there would be a bigger draw down on the reserves than the $4 billion made in 2009. Singapore currently has $7.7 billion in accumulated surplus, after taking into account the $10.95 billion projected deficit incurred by the government’s total spending in Budget 2020.

During last month’s Budget announcement, Deputy Prime Minister Heng Swee Keat, who also serves as Finance Minister, unveiled two special packages to cushion Covid-19’s impact – the Care and Support Package for households, and The Stabilisation and Support Package for businesses and workers – totalling $5.6 billion.

Since then however, the Covid-19 crisis has worsened across the world while several key industries that rely on people’s free movement, such as aviation, domestic commerce and tourism, are on the verge of collapsing.

Read: Singaporeans are still optimistic with the current real estate climate, according to PropertyGuru’s study

“The magnitude of the system shock we are experiencing now, with lockdowns of unknown duration being implemented around the world, are well beyond what was contemplated just two months ago,” said Christopher Gee, Governance and Economy Department Head at the Institute of Policy Studies.

Earlier in the month, Heng said that much like the Budget 2020 measures, the second support package’s key aspect would be helping workers keep their jobs. He also did not rule out the option of drawing down from past reserves.

“Plainly, the focus has shifted from mitigating the impact of the Covid-19 outbreak to cushioning the economy from an imminent recession,” said DBS Senior Economist Irvin Seah in a research note last week.

He noted that Singapore will have to leave some amount in the tank since there may be a third stimulus, as a contingency fund in case the situation worsens.

Ong Sin Beng, JP Morgan’s Executive Director of Emerging Markets Asia, Economic and Policy Research, said further packages is possible given the openness of Singapore’s economy to trade and travel-related services.

“Given that containment measures have been gradually increased, it also suggests a dynamic fiscal response calibrated to the severity of the containment measures. Thus, the supplementary budget on March 26 may not be the last,” said Ong.

UOB economist Barnabas Gan said the question of touching the reserves is “not about prudence, but about necessity”.

“The priorities of this second stimulus are likely to be similar to 2009 — to keep companies afloat and save jobs,” he added.

CIMB Private Banking Economist, Song Seng Wun said that while the second stimulus measures may help — whether in the form of tax cuts or wage subsidies — they are ultimately temporary and will eventually need to be removed, citing the example of the governments of some Asian countries who are still in deficit today as they were not able to recover from the support measures imposed during the 1997 Asian Financial Crisis. 

“If you take away taxes, for example, you have got to put it back after the crisis blows over. When things normalise, it is essential to resume with the way things were,” said Mr Song.

Ms Sian Fenner, Lead Economist at Oxford Economics said that the government will likely return the money back into the reserves once the economy recovers. The $4 billion draw downs made in 2009 was returned to Singapore’s reserves in 2011. 

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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email


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