Major Covid-19 fiscal measures in 2020 and 2021 prevented longer-term economic scars: MOF

SINGAPORE — Key Covid-19 fiscal measures over 2020 and 2021 have allowed Singapore to continue to grow resident employment and reduce potential economic output losses, the Ministry of Finance (MOF) said in a document.

Singapore’s support measures have thus helped to mitigate the potential longer-term risks of the Covid-19 pandemic, avoiding economic scars and the loss of human capital in the Republic.

These findings, based on a preliminary analysis of key Covid-19 measures, were shared in the Department of Finance’s assessment of the impact of Covid-19 fiscal measures, which was released on Thursday 17 February.

The document is based on an interim report published in February 2021.

Preliminary analysis of key fiscal measures also revealed that Singapore experienced a limited increase in corporate and government debt, maintained job prospects for recent graduates from tertiary institutes, and minimized the loss of school hours.

Broad social support, focused on low-income groups, has also helped to mitigate the unequal impact of the pandemic.

The paper noted how unemployment rates can rise and stay high for some time during a crisis, and said this can lead discouraged job seekers to drop out of the labor force.

But Singapore has managed to avoid such a scenario so far. Between 2019 and 2021, the employment rate for Singapore residents increased by 2 percentage points.

In comparison, South Korea recorded a decline of 0.3 percentage points in the two years, while Germany and the United Kingdom both recorded a decline of 1.3 percentage points.

The MOF pointed to two main reasons for the more favorable outcomes observed in Singapore: labor market programs that helped workers build their skills, and the fact that much of the overall employment shock was absorbed by foreign labor.

The document also described how the measures, intended to help workers and businesses weather the worst of the crisis and retain capacity to enable them to seize recovery opportunities, have reduced the loss of potential output.

Singapore’s economy grew 7.6% year-on-year in 2021, bettering the Ministry of Trade and Industry’s previous estimate of 7.2% and reversing the 4.1% contraction in 2020.

The Republic is on track to close its output gap in 2022 based on the International Monetary Fund’s October 2021 forecast, along with major advanced economies except the United States.

The output gap refers to the gap between the level of gross domestic product at any given time and its expected level before the pandemic.

Comments are closed.