Global growth forecasts have been slashed and now a global recession appears to be on the cards for 2020.
They were joined in lockstep by the European Central Bank , the Reserve Bank of New Zealand, among others.monetary policy settings by flattening the slope of the trade-weighted Singapore dollar nominal effective exchange rate back in October 2019, with another easing to a zero appreciation slope announced on Mar 30.In addition, the establishment of the US$60 billion swap line with the US Federal Reserve has calmed some market concerns about the ongoing US dollar funding squeeze.
However, economic theory has always accepted the role of counter-cyclical fiscal policy – of government discretionary spending and changes in tax policy to counter an economic downturn.With a bigger role played by the Government in the economy in this COVID-19 slowdown, some may wonder if businesses and households may start taking the ability and willingness of the Government to bail them out for granted.
The public sector’s involvement is crucial to help Singapore manage the risks and impact of this projected slump. Moreover, the current draw on reserves does not mean that the baby is being thrown out with the bath water. The golden rule about balancing the budget for each term of Government has been upheld, with the President’s approval sought for the draw on past reserves.
For instance, will the 10,000 jobs created fall mainly in the public or private sector? What is the proportion of permanent or temporary employment, and if they will be in economically viable growth industries?
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