Briefs

While the bulk of the $48 billion Resilience Budget is going towards helping businesses and workers stay afloat, Singapore households and individuals have not been left out.

Sabrina Sia, leader of global employer services at Deloitte Singapore, notes that the help given out has been specifically tailored to the population sectors that need it the most.

“As expected, relief to individuals was not given in terms of income tax rebates as rebates will not help the lower income earners who do not pay taxes,” says Sia. “This should help to provide temporary relief to households with their living expenses during this trying period.” For one, the $1.6 billion Care and Support package announced at Budget 2020 in February has been upsized to $4.6 billion.

The government is also freezing all government fees and charges for a year starting from April. Student loans repayment and interest charges on loans for university and polytechnic studies will be suspended for a year from June.

In addition, cash payouts announced in the initial Budget are slated to be tripled. Adult Singaporeans will now receive either $300, $600 or $900, depending on their income levels.

The amount for parents with at least one Singaporean child aged 20 and younger this year will also go up to $300, from just $100 before. “We will put more cash in the hands of all families to help them cope,” says Deputy Prime Minister and Finance Minister Heng Swee Keat.

In addition, low-income Singaporeans, who were originally set to get grocery vouchers of $100 over the course of 2020 and 2021, will now have this year’s allowance increased to $300. This translates to a total of $400 over two years.

Lower-income workers, including those who are self-employed, were not ignored either. The Workfare Special Payment will be increased to cash payouts of $3,000 each, a generous increase from payouts of some 20% of their Workfare Income Supplement payout last year.

A $1.2 billion Self-Employed Person Income Relief Scheme will allow eligible individuals such as taxi and private-hire car drivers as well as real estate agents to receive $9,000 in cash over a nine-month period.

An additional $48 million will also be set aside to extend the Self-Employed Person Training Support Scheme to help these individuals to train and upskill during the downtime. — Uma Devi

Economists eye monetary easing as core inflation slips into the red

Singapore’s core inflation continued its decline, falling into the red in February for the first time in a decade.

The price gauge, which registers inflation levels excluding accommodation and road transport costs, came in at –0.1% for February 2020, according to the consumer price index (CPI) released by the Department of Statistics on March 23.

The last time core inflation was in negative terrain was in January 2010, when it dipped to –0.5%.

The latest figure is a significant drop from the 0.3% recorded in the previous month and below the 0.1% forecast by private sector watchers in a Reuters poll.

Meanwhile, headline inflation — the measure of the total inflation in the economy — came in at 0.3%. This was a smidgen below the 0.4% forecast by market watchers, but a sharp dip from the 0.8% registered in January.

Private-sector economists are now downgrading their forecasts, with Maybank Kim Eng expecting full-year headline and core inflation to come in at 0.3%. They also expect the Monetary Authority of Singapore (MAS) to lower its range to between –0.5% and 0.5%.

“We expect to see inflation easing further in the coming months as the collapse in demand due to the Covid-19 will outweigh any price pressures from supply disruptions. A weakening labour market will also weigh on consumer sentiments,” say economists Chua Hak Bin and Lee Ju Yu.

Amid expectations of a lower-than-expected full-year growth forecast and the possibility of deflation, market watchers say an easing of monetary policy by the MAS could be on the cards.

“An easing of monetary policy will allow the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) to weaken further in line with the softened economic outlook,” says Barnabas Gan, an economist at the United Overseas Bank (UOB).

MAS has brought forward its six-monthly Monetary Policy Statement — when it updates its forecast ranges for headline and core inflation — slightly earlier to March 30. However, MAS says this should not be seen as an off-cycle move. — By Amala Balakrishner

Moody’s warns of potential downgrade to credit ratings of banks, insurers

Moody’s Investors Service has warned that it could downgrade the credit ratings of banks and insurers if the spread of Covid-19 and the resulting economic slowdown were to be prolonged and extensive.

Banks are at risk because local restrictions on movement, leisure activities and air travel will significantly weaken their operating conditions and asset quality, the ratings agency says.

In particular, lower consumption and higher unemployment and trade will lead to reduced borrower ability to meet loan payments, which in turn weakens the banks’ profitability.

Moreover, banks with greater credit exposure to the most affected sectors will be disproportionately impacted as well, it adds.

On the other hand, life insurers with older-age blocks of mortality business will face higher claims, says Moody’s. This is because infected persons over age 65 have a much higher mortality rate.

Trade credit insurers will also be exposed to the effects of rising claims as significant supply chain disruptions persist, says Moody’s.

This is especially for those with business concentrated in hard-hit regions, and particularly small and medium enterprises.

Property and casualty insurers too will be exposed to losses from business interruption and travel insurance claims, it adds.

“Although we will endeavour to position and, if necessary, reposition ratings at their appropriate levels as quickly as possible, we also recognise that greater visibility over the depth and length of the current crisis will be necessary to fully quantify the impact across some industries,” says Moody’s. — By Jeffrey Tan

Two-thirds of Singaporeans open to adopting digital-only banks

Close to 65% of Singaporeans are open to the idea of adopting a digital-only bank, according to the Visa Consumer Payment Attitudes Study.

According the study, which was conducted in October last year, some 84% of the 511 Singapore respondents indicated that they would be interested in using digital banking services offered by an existing bank, while only 63% said they are keen to bank with new start-ups.

Among those open to digital banking services offered by non-banks, 60% are willing to switch some services from their current bank to new digital banking players which have no prior banking experience.

The Monetary Authority of Singapore (MAS) in January said it had receive seven applications for the two digital full bank (DFB) licences on offer, and 14 applications for the three digital wholesale bank (DWB) licences.

The diverse group of applicants included financial institutions, e-commerce firms, technology and telecommunications companies, and FinTechs such as crowd-funding platforms and payment services providers.

According to Visa, respondents are attracted to the sign-up promotions, innovative products and services, as well as access to better rewards.

The top services that respondents would use a digital bank for include money transfers to family and friends (64%), paying bills (63%), and payments at retail shops (56%).

Meanwhile, Singaporeans say that they would prefer digital banks because of the convenience (54%), faster service (52%), and not needing to wait in line (45%).

“When the region shifts to a millennial, digital-led demographic, more consumers will expect digital-first experiences, and want their banking and payments to match the speed and convenience of their user journeys,” says Kunal Chatterjee, Visa’s country manager for Singapore and Brunei. — By Samantha Chiew