Resilience Budget 2020: Impact on Bonds

Timothy Ang  |   27 Mar 2020  |    32 views

In light of the economic slowdown from Covid-19, the Singapore government has stepped in in a big way to support businesses and workers.


The S$48 billion Resilience (Supplementary) budget announced yesterday brings the total stimulus package to S$55 billion (or 11% of Singapore’s annual GDP) after adding the S$6.4 billion package in Unity Budget 2020 (18 Feb 20).


We highlight the effects on our local bond issuers. 


Hospitality REITs

Hospitality REITs will receive support in the form of property tax rebates, reducing their costs and allowing them to retain more cash. 


For the year 2020, the government will provide a 100% rebate on property taxes for accommodation and function room components of licensed hotels and serviced apartments, as well as Meetings, Incentives, Conventions, and Exhibitions (MICE) venues (Suntec Convention, Singapore Expo, Changi Exhibition Centre).


Retail REITs

Retail REITs will also benefit from a 100% property tax rebate for 2020 on qualifying commercial properties in tourist attractions, shops and restaurants. These include sports and entertainment venues, schools and purpose-built workers accommodation. The inclusion of purpose-built workers accommodation in the list will stand to benefit Centurion as well. 


Industrial and Office REITs

Industrial and Office REITs will enjoy a 30% property tax rebate in 2020 covering Industrial, Office, Business or Science Park, and Warehouse properties.  


Local banks

Local banks are encouraged and supported by the government to provide easier credit access to businesses. This is done through enhancing the Enterprise Financing Scheme, Loan Insurance Scheme, and Temporary Bridging Loan Program.


The maximum loan quantum under the Enterprise Financing Scheme was raised – SME Working Capital S$600 million to S$1 billion and Trade Loan quantum from S$5 million to S$10 million with increased government’s risk-share of 80% (previously 70%). The Temporary Bridging Loan was expanded to all sectors with quantum increased from S$1 million to S$5 million. 


Singapore Airlines (SIA) and SATS

Singapore Airlines (SIA) and SATS, businesses key to Singapore’s aviation sector, will be wholeheartedly supported by Temasek and the Government. As it is, the aviation sector contributes over 5% of Singapore’s GDP and is regarded as crucial to our nation’s trade advantages. To preserve this, the government will assist to co-fund local employee wages in the aviation sector by 75% for 9 months.


In addition, SIA revealed this morning a slew of recapitalization measures fully underwritten by Temasek to raise funds. These include a S$5.3 billion equity rights issue, a S$3.5 billion Mandatory Convertible Bond Issue which can be increased to S$9.7 billion, and a S$4 billion bridge loan facility. The government has shown its full commitment to support the national carrier.


Other Key Measures

Enhancement of Jobs Support Scheme to support business costs and local employment

For a period of 9 months, businesses will receive wage support for their Singaporean workers. The government will fund 25% of monthly wages of every local worker up to a cap of S$4.6k. In addition, businesses particularly affected by Covid-19, such as ‘Aviation & Tourism’ and ‘Food Services’ firms, will receive wage co-funding of 75% and 50% of monthly wages respectively.  


3-month deferment of Corporate Income Tax to aid cash flows

Corporate Income Taxes will be deferred by 3 months to help businesses retain cash. Taxes due in Apr-Jun will be paid in Jul-Aug instead.  


Bottom Line

The Singapore government is committed to carry the economy through the Covid-19 crisis. The Resilience Budget helps alleviate the financial hardships of businesses and citizens, and provide well needed relief for our local bond market. 



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