Reform Party notes the latest announcement by the Economic Development Board (EDB) that manufacturing output fell by 2.5% compared with the same period a year ago and by 5.7% on a seasonally adjusted annualized basis compared with last month.
The technical definition of recession is two quarters of negative growth. After annualized quarterly growth of only 0.1% in Q1 2014 (which looks suspicious in any case and may be revised) second quarter growth is likely to be unambiguously negative. We are very close to recession even if not actually in one yet, according to our Statistics Department, which is not independent of the PAP government. While the EDB and the government expect a recovery in global demand to revive growth, this is probably over-optimistic given a slowing global economy, Chinese debt problems and the likelihood that Europe is back in recession.
In April Reform called for a stimulus package (see link) of at least $2.5 billion, or about 0.6% of GDP. This would still be less than 10% of the government’s real surplus for the year. Part of the cost would be recouped through higher tax receipts.
This was to be in the form of cash payments to each Singapore citizen household member with payments to children below the age of 18 going to the mother. The details were as follows:
Bottom 20th Percentile $2000
20th-50th Percentile $1000
50th-75th Percentile $ 200
For children below the age of 18, the payment should be made to their chief caregiver, normally their mother.
In light of the likelihood that the economy is on the brink of recession, Reform now calls for the stimulus to be raised by 50% for the bottom 50% of the income distribution. This would raise the cost to approximately $4 billion, or just over 1% of GDP, before factoring in the additional tax receipts that would be generated by the increased output.
Longer term, as part of efforts to reduce poverty, Reform wants to see the introduction of a scheme similar to the US Earned Income Tax Credit in Singapore to replace the inadequate Workfare Scheme, which many low-income workers fail to claim. This would provide low-income households with children with a guaranteed income top-up, which would be gradually withdrawn as their income approached a level of, say, 50% of the median income. The size of the credit would be linked to the number of children.
Kenneth Jeyaretnam
Secretary General