SINGAPORE: A SMALL country facing the biggest recession in its short post-colonial history, one which threatens newfound wealth and is giving the government massive headaches - sound familiar?
But this is Singapore, where the government slashed its 2009 growth forecast for a second time this month. Analysts believe the economy could shrink as much as 5 per cent as global demand for the country's exports collapses.
While Singapore's plight has parallels with Ireland's, the response has been swift and decisive and could serve as a template for our recovery.
The government has unveiled a plan to lower corporate taxes, subsidise wages, guarantee bank loans and spend more on infrastructure as part of the SG$20.5 billion (roughly €10.3 billion) stimulus package.
Singapore used its boom years as a global financial centre and high-tech manufacturing hub to set money aside for a rainy day.
To fund the plan, finance minister Tharman Shanmugaratnam is dipping into the government's SG$4.9 billion (€2.45 billion) of reserves.
The plan will widen this year's fiscal deficit to a record for Singapore, but the main focus is on maintaining jobs in the city-state, where 10,000 jobs were lost last year and more losses expected by the end of next year. Among the measures in the plan are a 20 per cent personal income tax rebate of up to $2,000 (€1,000) per worker and a range of other tax cuts.
The government also plans to subsidise 12 per cent of the first SG$2,500 (€1,250) of each employee's monthly wages, introduce a range of new training programmes and expand existing schemes, increase the amount of cash handouts given to low-income workers by 50 per cent, and hire more public sector workers.
The government will spend SG$5.1 billion (€2.6 billion) to help companies avoid lay-offs and has underlined its determination to improve its standing as an investment centre by cutting the maximum corporate tax rate to 17 per cent, from 18 per cent. This is getting close to its rival in Hong Kong.
The city-state will also boost aid to welfare recipients, government pensioners and students, and invest SG$4.4 billion (€2.2 billion) in infrastructure projects such as the subway system, roads, public housing, parks and military facilities.
