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Budget 2021 expected to be expansionary, despite usual conservative first budget: Economists

SINGAPORE — Even though Singapore’s economy is on the mend after weathering the Covid storm, the Government will likely run a deficit in Budget 2021, as hard-hit sectors and low-income households still need help. This is the analysis from four economists who spoke to TODAY on Tuesday (Jan 19).

Budget 2021 expected to be expansionary, despite usual conservative first budget: Economists
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  • Typically the Singapore Government is careful not to run a deficit in the first Budget of a new term but this year will be different
  • Factors such as a possible resurgence of Covid-19 around the world and a need to sustain job growth will likely see the Government running a deficit in Budget 2021 
  • But the support measures to be unveiled will likely be more targeted than those offered last year
  • Expect measures to support mainly low-income groups and companies in hard-hit sectors, economists said


SINGAPORE — Even though Singapore’s economy is on the mend after weathering the Covid storm, the Government will likely run a deficit in Budget 2021, as hard-hit sectors and low-income households still need help. This is the analysis from four economists who spoke to TODAY on Tuesday (Jan 19).

However, they added that the support measures to be announced in the upcoming Budget on Feb 16 will likely be very targeted, to help those who need it the most. 

This would be unlike the Unity Budget in 2020, which offered broad-based support to wide swathes of society because many in Singapore were affected then by the fallout of the Covid-19 pandemic.

Budget 2021 will have to be targeted because it will be the first of the new term of government, and such Budgets tend to be conservative, because the Singapore Government strives for a balanced budget at the end of each five-year term, the economists said.


An expansionary budget is one in which a Government spends more than it receives in revenues, resulting in a deficit.

While the economy seems to be on the mend, the economists interviewed said there are several factors that will likely lead the Government to unveil an expansionary Budget next month.

  • The risk of a resurgence of Covid-19 infections around the world remains and this could have a dampening effect on Singapore’s economy 

  • There is a need to sustain employment creation and wage support in the coming months

  • Singaporeans and businesses need to be ready for the challenges in a post-pandemic world and may need fiscal support to do this 

  • OCBC bank’s head of treasury and research Selena Ling said that policymakers will likely “still try to run a modestly expansionary fiscal stance to help beleaguered industries, firms and workers until there is greater conviction and clarity that the recovery is sustainable”

Still, the economists said they have reason to believe that the Government will exercise some prudence at the same time:

  • Dr Chua Hak Bin, a Maybank Kim Eng analyst, said that the economy is going to emerge from the recession this year, and so the Government may consider reducing its fiscal stimulus. “I think the support will probably be a bit more targeted, selected and modest… It shouldn’t be the same across-the-board help as before.”

  • The combined effects of jobs-related support measures rolled out in 2020, such as the Jobs Support Scheme and Job Growth Incentive, have softened the impact of this crisis on the resident workforce, the economists noted

  • The unemployment situation has stabilised — with overall, resident and citizen unemployment all lower last November compared with last October

  • The ratio of job vacancies to unemployed jobseekers inched higher in the previous quarter


In the coming year, the Government will likely focus on sustaining employment creation and wage support, DBS economist Irvin Seah said in a research report on Tuesday:

  • Employment prospects are expected to remain soft until the second half of the year, when the economic recovery will likely become more pronounced

  • Employers are expected to take a cautious approach in hiring, preferring to recruit only when earning prospects are more certain

  • Some of the worst-affected sectors, namely hospitality and aviation, which have shed a significant number of jobs, are still struggling

  • Some of the jobs created through measures such as the SGUnited Jobs and Traineeship Programmes could be temporary positions, and a new cohort of degree and diploma graduates will be joining the workforce this year

  • Lower-income groups bore the brunt of the crisis, as most of the jobs that were affected are frontline, consumer-facing jobs which tend to pay less

  • Some of the jobs lost in the crisis may also never return 

As a result, economists expect that some policy measures will focus on supporting wages, creating new jobs, upgrading the skills of local workers and rendering more help to vulnerable segments of the society:

  • The Jobs Support Scheme for the worst-affected sectors such as hospitality and aviation could be extended

  • There will likely be cash grants to help those who remain unemployed

  • The Job Growth Incentive may be enhanced, with up to 75 per cent of wage support for hiring of lower-waged workers while support levels will likely remain for new hire of residents and for workers aged 40 and above — at 25 per cent and 50 per cent respectively

  • The SGUnited Traineeship scheme might be extended to offer help to the upcoming cohort of fresh graduates

  • More subsidies for training and upskilling of resident workers can be expected 

  • Mr Barnabas Gan, an economist at UOB Group, said that other social policies such as grocery vouchers and Goods and Services Tax vouchers could be on the cards

  • Mr Gan added that since tourism-related demand may “likely remain soft”, similar tourism credit such as the SingapoRediscovers Vouchers could be reintroduced to support the industry


Fiscal efforts will be targeted at sectors that are still struggling, and be tapered off for those that have recovered. Dr Chua of Maybank Kim Eng said that many industries have stabilised as Covid-19 case numbers here have tapered off, but industries that depend on global demand such as tourism, hospitality and aviation will continue to feel the pinch from the pandemic. 

This will mean: 

  • The Jobs Support Scheme for these struggling sectors will likely be sustained, Mr Seah of DBS said 

  • Support measures for the industries that have outperformed will be allowed to lapse or to taper off in 2021 

  • Many of the temporary measures such as rental waivers, tax rebates, loan deferments and foreign worker levy waivers are unlikely to be extended, Mr Seah added 

  • Economist Song Seng Wun from CIMB Private Banking said that a year on, the Government will be able to fine-tune their policies to target specific sub-sectors that are still facing tremendous headwinds

  • Mr Song gave the example of the catering sub-sector. Though it is part of the larger food-and-beverage industry, which has been seeing a modest recovery, the sub-sector is still badly affected due to a dearth of large-scale events and may benefit from more targeted funding 

  • Ms Ling of OCBC added that the Government will recognise that withdrawing support during an uncertain recovery may be risky. “Any premature withdrawal of policy support could (have a) potentially destabilising effect.” 

However, Mr Seah of DBS cautioned that there may be a further tightening in foreign manpower policies. 

“Though the number of foreign workers may have fallen significantly during the crisis, policymakers may want to capitalise on this window to further nudge companies towards fostering a Singaporean core workforce, and to invest in automation,” he said. 

“The concern is that some companies may switch back to the ‘old habit’ of relying heavily on foreign manpower when growth picks up and when the borders reopen.”  

Mr Seah added that there are still about 109,000 unemployed residents, including 94,000 citizens as of November, and one key priority of the Government will be to help these workers.

“Employers should be prepared for more foreign manpower tightening even if no adjustment is made in the forthcoming budget.” 

Related topics

Budget 2021 economy Covid-19 business low-income households

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