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Covid-19 mitigating measures would cause drastic economic impact, but trade-off is inevitable: DPM Heng

SINGAPORE — The closure of all non-essential workplaces for a month from Tuesday (April 7) will have a drastic impact across the whole economy and it is difficult to predict when this crisis will be over, Deputy Prime Minister Heng Swee Keat said in Parliament.

Covid-19 mitigating measures would cause drastic economic impact, but trade-off is inevitable: DPM Heng

Deputy Prime Minister Heng Swee Keat said that until an effective vaccine or treatment is developed, the Government's policies can only seek to mitigate the Covid-19 fallout.

SINGAPORE — The closure of all non-essential workplaces for a month from Tuesday (April 7) will have a drastic impact across the whole economy and it is difficult to predict when this crisis will be over, Deputy Prime Minister Heng Swee Keat said in Parliament. 

“Until an effective vaccine or treatment is developed, our policies can only seek to mitigate the fallout,” Mr Heng said, adding that Singapore has to “plan for the worst and work towards the best”.

Mr Heng was giving a round-up speech to conclude the debate on the Government’s second and third set of support measures to help businesses and workers hit hard by the Covid-19 pandemic.

He noted that the World Health Organization (WHO) has cautioned that a viable vaccine is at least 12 to 18 months away, even as the global scientific community is racing to find one.

The Government’s top priority, therefore, is to save lives and keep the rate of infection and transmission low, he said.

“This is absolutely critical. If we fail in this, our healthcare system will be overwhelmed.”

However, to keep the number of cases low, there is an unavoidable trade-off in the immediate term, and that is the impact on Singapore’s economy, Mr Heng added.

“The more stringent the measures we put in place to keep the number of cases down, the bigger the impact on our economy. In the immediate term, this is a trade-off between protecting lives and protecting the economy that we must all accept — not just in Singapore, but around the world.”

Thus, Mr Heng said that Singapore’s best response now is to build resilience, by ensuring businesses are not permanently damaged and affected workers are able to bounce back.

He said that the economy is hit on so many fronts that it is not possible to just restore its status quo.

And as Singapore is one of the most open economies in the world, injecting funds cannot counter the extensive global supply-and-demand shocks.

The crisis brought on by the Covid-19 pandemic is much more complex than previous crises the world has seen before, such as the Asian financial crisis in 1997 and the global financial crisis between 2008 and 2009, Mr Heng noted.

Both of these crises were severe, but he said that the root causes were largely financial mismanagement that were then amplified through an interconnected economy. Later, targeted solutions restored confidence.

But today, financial markets and the global economy are far more integrated and interdependent than they were a decade ago.

The global supply chain is also much more integrated now, such that the actions taken by one country to contain the outbreak would disrupt the whole chain.

“The effect of the outbreak is a sharp reduction in global aggregate demand and a widespread disruption to the global supply chain. This is sending shock waves across the world,” he said.

“The reality is that no one really knows how badly economies will be hurt and how long they will take to recover.”

Even the most skillful forecasters have had to revise their economic projections repeatedly, Mr Heng said, pointing out that the International Monetary Fund (IMF) has downgraded its global growth forecast three times since the start of last year.

What is needed now is for the global community, including the IMF and WHO, to coordinate and manage the crisis, he said.

“The world must band together and do its utmost to avert catastrophic consequences,” Mr Heng added.

Singapore has to do its part as well, and use its strengths to support multilateral institutions in their mission, help build global consensus and do whatever is within its power to get through this crisis collectively, he said.

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