Singapore: “Sharp cliff effect” not likely when government relief schemes cease

Many companies have been able to weather the impact of the pandemic thanks to various government support and relief schemes.  

But as these measures are due to end going into the new year, many companies are concerned whether retrenchments and closures will hit them hard when the financial aid is withdrawn. 

A sharp cliff effect should not manifest because the extension and timing of the government payouts, coupled with transmission lag, would ease the transition, said Maybank Kim Eng analysts Chua Hak Bin and Lee Ju Ye. 

In addition, wage subsidies such as the Jobs Support Scheme (JSS) have been extended to “smoothen the policy cliff” going into 2021, Citi economist Kit Wei Zheng said. 

“We are not expecting a spike in business cessations or retrenchments with the ending or tapering of the JSS,” said the Maybank analysts. 

In fact, sectors such as financial and infocomm services, where the JSS ends earlier, “are growing at a healthy pace and no longer need the job support payouts”, they said, adding that some sectors are actually hiring again with the reopening of the economy.  

READ: Singapore’s general labour market to see uptick in 2021

Concurring, UOB senior economist Alvin Liew said the end of the JSS will not be a cause for concern in growing industries like electronics, bio-medical and e-commerce where retrenchment is unlikely.  

Another factor is that the timeline of the tapering off of the support was announced in advance, and companies would have adjusted their business plans accordingly, said Association of Small and Medium Enterprises president Kurt Wee, adding that many companies which have not closed shop have gone lean and are managing costs carefully, according to Business Times.