SINGAPORE – With the economic recovery gaining traction, some measures and support programs for Covid-19 will expire, while others will be limited in size and scope from Thursday, April 1.
These include insurance relief for businesses and individuals and the Employment Assistance Plan, which will cease for all companies except those in hard-hit sectors.
Some business finance programs will also see their improvements cease, such as the Business Finance Program – Working Capital Loan to SMEs.
However, some companies could continue to struggle as conditions remain difficult for their industries.
The overall economic context has improved considerably since the record drop in growth during the May-June 2020 quarter, which was hit hard by the circuit breaker at home and blockages abroad.
However, the recovery momentum has so far been dominated by the export-oriented manufacturing sector. Services continue to face travel restrictions and social distancing measures.
Most analysts and industry leaders contacted by The Straits Times agree that the recovery is not yet fully synchronized and that many companies, especially small and medium-sized enterprises (SMEs), still have struggling to catch up.
Singapore Business Federation chief executive Lam Yi Young told ST that a post-budget survey found that 69% of large companies and only 37% of SMEs were confident their businesses would resume within six to six months. Next 12 months.
The SBF survey conducted from February 17 to March 12 gave responses from 218 companies – 82% were SMEs – and showed that 46% feared that the measures in the 2021 budget were not sufficient to cover the impact of Covid- 19 on companies.
Meanwhile, 44 percent felt the measures were balanced to address long-term and immediate challenges.
The SBF’s conclusions correspond to the comments analysts receive from SMEs.
Ms. Selena Ling, OCBC Bank Chief Economist and Head of Treasury Research and Strategy, said: “The anecdotal return of SMEs is that while green shoots grow, some are still cautious about sustainability. of these green shoots, especially if political support runs out and their specific industry still faces significant headwinds. ”
She added: “The reality is that costs may have increased in the areas of Covid-related hygiene and social distancing measures in their day-to-day operations, but demand conditions may not be completely normalized.”
For example, food and beverage outlets are grappling with capacity constraints as restaurant meals are still limited to groups of eight, and delivery services and supermarkets are in fierce competition.
SMEs are important not only for the overall economic recovery, but also because they employ most of the local workforce.
Mr Lam said that most of the companies consider the salary credit program, the job growth incentive and SGUnited Skills, Traineeship and Mid-Career Pathways programs as the most useful measures of the 2021 budget.
Mr Irvin Seah, Senior Economist at DBS, said: “We are not quite out of the woods. There are companies that are still struggling and as a result there could also be pockets of layoffs in the pipeline. come.”
Ms. Ling of OCBC agreed that the healing in the domestic labor market may be slower than the recovery in aggregate GDP growth.
“It is plausible that there is a temporary slowdown when support runs out, but the key to the survival and competitiveness of SMEs should not be based on support but ultimately on demand,” he said. she noted.
WEC Engineers & Constructors, a civil construction and infrastructure company, is among many local SMEs in the built environment sector where labor costs have increased due to restrictions on the influx of workers. migrants.
Companies in the sector are also operating at lower capacity due to the need to adhere to sound management measures, while the industry itself is at the forefront of a campaign to reduce reliance on it. foreign workers.
Mr. Lee Yeow Siang Matthew, Executive Director of WEC, said: “While we appreciate the government support for many initiatives over the past year, such as the employment support program and so on. , we have not yet reached the required level of productivity. before Covid.
“This has affected our ability to sustain our business profitably to absorb all the costs necessary for the measures that have been implemented to curb the spread of Covid. “
Mr Lee said increased government support and better administration of workforce programs that encourage the built environment sector to hire more residents would help.
More machinery grants from the Building and Construction Authority can help accelerate mechanization and digitization, he said.
Mr Lee said spending increases related to Covid may be partly offset by subsidies for dormitory operations that are proportional to the actual cost, and subsidies for polymerase chain reaction (PCR) testing up to in 2022. But with the deployment of vaccinations, the frequency of these tests should be reconsidered.
However, analysts said government aid helps but is not the solution to all problems.
Mr. Seah of DBS said: “When it comes to political support, there is no one-size-fits-all solution. And continued tax support” to alleviate the pain “is also not sustainable in the long term.”
Companies that are more agile and able to look to new opportunities, or those that are able to take advantage of digitization or new business models could emerge stronger from this crisis, he added.