Supplementary Budget will 'flatten curve' of economic pain

THE S$48.4 billion "supplementary budget" unveiled by Finance Minister Heng Swee Keat on Thursday will not avert a long and tough recession. But it could shield Singapore from being overwhelmed by the second-round effects of the sudden halt in economic activity in the face of the Covid-19 pandemic - including bankruptcies, loan defaults, unemployment and a slump in domestic demand.

In effect, the massive fiscal response will "flatten the curve" of economic pain and financial trauma felt by everyone, and reduce the likelihood of businesses laying off workers or closing their doors. It is analogous to promoting hand washing and social distancing to prevent a surge in Covid-19 infections from overwhelming our healthcare facilities, reducing the possibility of people dying unnecessarily.

For investors, it might be tempting to believe that such massive fiscal measures will mark a turning point for the markets. In fact, there appeared to be some return of global market confidence this past week as US lawmakers cobbled together a US$2 trillion emergency relief bill that will provide funding for business loan programmes and unemployment benefits, among other things.