Singapore on Thursday announced a $20.5 billion stimulus package to help companies and save jobs along with a 1 per cent cut in corporate tax as the financial centre grapples with its worst-ever recession.

The package, which comes on top of regular government spending, includes S$5.1 billion on training and other measures to save jobs and S$5.8 billion to stimulate bank lending.

"The resilience package will not get us out of recession," Finance Minister Tharman Shanmugaratnam told Parliament as he unveiled the 2009/2010 budget.

"But it will help avert an even sharper downturn, and more lasting damage to the economy."

Tharman said the budget for the fiscal year ending March 2010 will be Singapore's largest ever at about 6 per cent of gross domestic product (GDP), before accounting for transfers.

Government bonds fell on the news of the stimulus plan and expectations for a large fiscal deficit, pushing yields across the curve up by about 10 basis points to 15 basis points.

"The devil is in the detail, but the initial verdict by the market is that this is a sizeable deficit and stimulus, which has prompted bonds to sell off," said Claudio Piron, a strategist at JPMorgan Chase.

Five-year yields jumped to 1.24 per cent from 1.14 per cent before the budget announcement, while 10-year yields climbed to 1.82 per cent from 1.71 per cent.

Singapore said on Wednesday its economy shrank at an annualised and seasonally adjusted rate of 16.9 per cent in the fourth quarter, the deepest contraction on record.

It predicted the economy would shrink as much as 5 per cent this year.

Singapore has already announced plans to bring forward about $4.7 billion worth of construction projects as well as initiatives to help small and medium enterprises get loans.

"It will not produce a fundamental turnaround for the economy of course but will help cushion some of the pain. It's a big bang budget I will call it - most likely funded by the fiscal reserves although we will have to wait for further details," said Kit Wei Zheng, economist at Citigroup.