Spending

Ramping up spending, the government will proceed with some $20 billion of construction projects and bring forward work deferred earlier.

And even in these times, there is room in the Budget to encourage giving to charity, and promote green and clean energy initiatives. About $1 billion will be spent over the next five years on initiatives for sustainable development.

Russell Aubrey, head of tax at Ernst & Young Solutions LLP, calls it a 'bold and credible Budget for immediate survival and future sustainability'.

The government has pulled creative policy levers to resuscitate the flagging economy, he said.

The Budget also shows that fiscal prudence pays, Mr Aubrey adds. 'Singapore now has the ammunition to tackle this extraordinary economic downturn head on.'

HSBC's economists note that at about 8 per cent of GDP, the $20.5 billion package is 'fairly big by regional standards' and similar in size to past rescue packages in 1998 and 2001.

'We do believe that the multi-pronged approach should help shore confidence somewhat,' said Prakriti Sofat. 'Nevertheless, growth numbers are going to be terrible over the first six months of the year, but as benefits of the package start feeding through, we expect some improvement in the later part of 2009 and into 2010.'

Barclays Capital economist Leong Wai Ho estimates that the fiscal boost from the Budget could add 1.5 points to headline growth in 2009. That would still mean a negative GDP pace, going by the official forecast of a 2-5 per cent contraction.

As Mr Tharman told Parliament, the package 'will not get us out of the recession . . . but will help avert an even sharper downturn'. Citigroup's Kit Wei Zheng believes that Budget 2009 may not mark the end of the fiscal response to the recession.

'The unprecedented use of fiscal reserves opens the door to possible off-Budget packages down the road, as indicated by the finance minister,' he notes.

Mr Kit voiced disappointment over the lack of a personal income tax cut.

'We also felt that measures to provide relief for middle-income groups could have been more generous. For example, instead of extending the tax instalment payment period for retrenched persons, an outright tax holiday could have been granted.'

Overall, the big resilience package will result in a bigger $2.2 billion deficit for FY2008; and for FY2009, after $1.4 billion in transfers and $7.7 billion net investment returns, a bottomline Budget balance of $8.7 billion in the red. That's a record 3.5 per cent of GDP.

This article was first published in The Business Times on January 23, 2009.