Singapore's government unveiled a multibillion dollar plan to boost spending and cut taxes in a bid to ease the worst recession in the city-state's history.
The government will lower corporate taxes, subsidize wages, guarantee bank loans and spend more on infrastructure as part of the $20.5 billion Singapore dollars ($13.6 billion) stimulus package, Finance Minister Tharman Shanmugaratnam said Thursday in a televised speech.
The spending surge will widen this year's fiscal deficit to a record for Singapore and will be partly paid for by tapping SG$4.9 billion of reserves, he said.
"Our key objective in this package is to help Singaporeans keep their jobs," Tharman said. "We have to expect many more jobs to be at risk this year."
Singapore slashed its 2009 growth forecast Wednesday for a second time this month, saying the economy could shrink as much as 5 percent as global demand for the country's exports collapses.
The ruling People's Action Party, which has governed Singapore since it split from a federation with Malaysia in 1965, is hoping the stimulus package's array of tax cuts and rebates will put cash in pockets of consumers and resuscitate domestic demand.
The plan includes a 20 percent personal income tax rebate of up to $2,000 per worker and a range of other tax reductions.
Tharman said the country's fiscal deficit would balloon this year to SG$8.7 billion, or 3.5 percent of gross domestic product, from SG$2.2 billion, or 0.8 percent of GDP, last year.
"We did not anticipate the speed and scale of the deterioration in the global economy in the last six months," Tharman said. "We're likely to experience the deepest recession in Singapore since our independence."
The government will spend SG$5.1 billion to help companies avoid layoffs, highlighted by a cut of the maximum corporate tax rate to 17 percent from 18 percent.
It also plans to subsidize 12 percent of the first SG$2,500 of each employee's monthly wages, boost training programs, hike cash handouts to low-income workers by 50 percent, and increase public sector hiring.
The government will also assume 80 percent of the risk on private bank loans of up to SG$5 million to help spark lending and investment.
"We do believe that the multi-pronged approach should help shore confidence some what," said Prakriti Sofat, an analyst with HSBC in Singapore.
The city-state will also boost aid to welfare recipients, government pensioners and students, and invest SG$4.4 billion in infrastructure projects such as the subway system, roads, public housing, parks and military facilities.