As the economy slides into what seems an inevitable recession, Deputy Prime Minister Heng Swee Keat, who is also Finance Minister, has produced his third Budget in less than two months. Another $5.1 billion will be spent, bringing the total amount earmarked to contain the economic devastation caused by Covid-19 to almost $60 billion, equivalent to a record 12 per cent of gross domestic product .

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This is a war-footing response and there may be more to come, depending on how the pandemic evolves.

But at this stage, three points are worth highlighting.

First, the unfortunate reality is that measures to control the spread of Covid-19 affect the economy, and the tighter the measures, the greater their negative economic impact.

When Mr Heng announced his first Budget on Feb 18, Covid-19 was in its relatively early stages and had not yet been declared a pandemic. Singapore had 84 confirmed infections and no deaths. Social distancing advisories were not in place – we were all still working in our offices and people were out and about.

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As the pandemic intensified, infection rates soared across the world, including in Singapore, where cases now exceed 1,300. With the rate of growth in new infections having risen in recent days, measures to control their spread have had to be tightened. With the so-called circuit breaker now in place, schools and most offices, factories and stores – barring those that provide essential services – are closed. This will damage the economy further, which calls for greater support to companies and workers.

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In other words, as the spread of Covid-19 evolves, it needs a calibrated and proportional response. This third “Solidarity Budget”, which builds on the previous two, is part of that response. It may not be the last, especially if the rate of infections continues to rise.

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AN INTERCONNECTED ECOSYSTEM

Second, implicit in this Budget is the recognition that the economy is an interconnected ecosystem. In the initial stages of the Covid-19 outbreak, it was obvious that industries such as aviation, tourism and food services were especially hard hit, which justified higher wage subsidies for these sectors. But as the crisis deepened – not only in Singapore, but around the world – and social distancing increased, the damage spread to nearly all parts of the economy.

Factories – already hit by a breakdown in supply chains and reeling from a fall-off in global demand – operated at a fraction of their normal capacity; construction activities were cut back; restaurants, bars and shops closed down; the local transport industry slowed to a crawl as people avoided commuting; and the events and entertainment industries came to a standstill.

With the introduction of the circuit breaker, the economic slowdown will further broaden and intensify. It will become impossible to pick bigger and smaller losers or “front-line” and “non-front-line” industries to provide differential levels of subsidies. It is therefore logical to provide generous support across the board, as Mr Heng has done with the enhanced Jobs Support Scheme, which subsidises wages for all companies to the tune of 75 per cent (up to the first $4,600 of wages per local worker).

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He has also broadened the support for the diverse group of self-employed workers, including some who live in private properties – many white-collar professionals are also part of this group. At the same time, the Government is providing more assurance to commercial tenants by legislating that landlords pass on the property tax rebates granted to them, which some were hesitating to do – moral suasion apparently did not work.

Many companies, including some landlords, will also benefit from reliefs on debt servicing as well as enhanced loan subsidies – with the Government now taking up to 90 per cent of the repayment risk – as well as the deferral of certain contractual obligations. Waivers and rebates on foreign worker levies will also help cushion the blow for companies that rely on such workers, which are spread across manufacturing, services and construction.

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SPEED IS OF THE ESSENCE

Third, the Solidarity Budget recognises that speed is of the essence. The damage to the economy is spreading like the virus itself. In the first three months, 239 companies have gone into liquidation, compared with 287 for the whole of last year, according to the Accounting and Corporate Regulatory Authority. Some of them had been struggling even earlier but the outbreak has pushed many over the edge.

The catch is that many of these measures – notably the enhanced Jobs Support Scheme and waivers on foreign worker levies – extend only through April. What will happen after that is uncertain. The most important variable is the rate of Covid-19 infections, both in Singapore and elsewhere.

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Another 19,000 companies have ceased operations since January – that is more than 200 companies a day, on average. Many of them could also face liquidation. As Monday’s Business Times revealed, a restaurant group called #savefnbsg reported that despite all the relief provided in the last two Budgets, 88 per cent of its more than 400 members may close up shop within 30 days and more than 80 per cent plan layoffs.

So with every day critical to the survival of companies, this Budget doesn’t come a moment too soon. It also brings forward the timing of the payouts – for example, from May to April in the case of the Jobs Support Scheme. Hopefully this infusion of cash will stave off at least some layoffs and liquidations. In that sense, the Solidarity Budget is not so much a stimulus as a backstop to ensure that more companies and establishments will still be alive when the crisis is over, and households – which will get a one-off $600 cash payout for every adult Singaporean member – will have, at least for now, enough to get by.

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GLIMMERS OF HOPE

The catch is that many of these measures – notably the enhanced Jobs Support Scheme and waivers on foreign worker levies – extend only through April. What will happen after that is uncertain. The most important variable is the rate of Covid-19 infections, both in Singapore and elsewhere.

The experience of some other countries offers glimmers of hope. China and South Korea were able to largely control the outbreak within three months and their economies are slowly coming back on track. There are also signs that the rates of infections are starting to taper off in parts of Europe and the United States. We have yet to see such encouraging trends in Singapore. Hopefully it will not be long before we do.

But that would only mark the end of the beginning. Despite the triple dose of backstop measures and a record Budget deficit, projected at close to 9 per cent of GDP, we will still have a recession and all that goes with it, including job losses and company closures.

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THE LONG CLIMB BACK

The climb back will probably be hard and long. With global demand devastated and business and consumer confidence shattered almost everywhere, a V-shaped recovery is out of the question. The pessimists suggest the recovery will be “L-shaped”, which is not much of a recovery. As an optimist, I suggest it will be “wok-shaped” – more like a stretched-out “U”. How we can accelerate the recovery is a story for another day. Meanwhile, let’s focus on survival.