FILE PHOTO - Office workers walk to the train station during evening rush hour in the financial district of Singapore March 9, 2015. REUTERS/Edgar Su/File Photo
SINGAPORE: Singapore presented a bigger budget for the coming year, providing support for its most struggling sectors but keeping a surplus in case global economic conditions worsen and put the city-state’s growth at risk.
Following up on recommendations by a key advisory panel this month, the budget unveiled projects to invest in infrastructure, deepen the workforce’s tech skills and digitalise the economy.
Firms will get help to scale up and invest overseas to tap into growing markets around Singapore, as the government aims to maintain an average 2%-3% annual economic growth rate over the next 5-10 years.
Singapore’s budget surplus for the fiscal year beginning April 1 is expected to be 0.4% of economic output, compared with an estimated 1.3% in 2016/17.
Expenditures would be 5.2% higher than in the current year, at S$75.07bil.
“When I presented the last budget, Brexit seemed remote and the US had just started the process of electing their new president. Events since then are a stark reminder of how quick and unpredictable change can be,” Finance Minister Heng Swee Keat told parliament on Monday.
“As we expect expenditures to continue rising in the long term, this budget position is prudent, while supporting firms and households in the midst of continued economic restructuring,” Heng said.
Singapore’s wide-open economy is highly dependent on trade, and Washington’s pull-out from the Trans Pacific Partnership trade deal has been a major blow to the island’s growth plans.
Analysts say that while the bigger budget shows the government’s willingness to offer support to the sluggish economy, the plans for a surplus shows policymakers want to keep some ammunition in case risks associated with Donald Trump’s trade policies in the United States materialise.
“There was a bit more scope to push a bit further... Maybe they’re saving the bullets in case things turn down,” said Chua Hak Bin, senior economist for Maybank Kim Eng. “Clearly, the government didn’t go all out.”
Singapore’s governments are mandated to run a balanced budget over the entire length of their terms.
Higher water prices
While local firms, especially those in the struggling construction sector, seemed to be the clear winners in the budget, utilities and consumers will take a hit.
The first water price hikes in almost two decades and a 2019 carbon tax will later aid the revenue side. The budget contains extra funds to help lower-income households handle their bills.
The overall budget surplus for the coming budget year is expected to be S$1.9bil.
Previously-announced hikes in the foreign workers levy in the marine sector were deferred, but the government will proceed with similar increases in the construction sector.
To aid construction, the government announced that S$700mil in infrastructure projects will be brought forward to 2017 and 2018.
The government also will invest an extra S$500mil in research and S$1bil in programmes to boost productivity.
The measures come at a time when labour market conditions have worsened amid lacklustre economic growth. Job redundancies in 2016 hit a seven-year high and total employment grew the least in 13 years.
Singapore posted its fastest growth in more than six years in the fourth quarter, expanding at an annualised 12.3% from the previous three months.
Full-year growth in 2016 remained anaemic at 2.0%, but analysts said the bigger budget reduced chances of further easing by the Monetary Authority of Singapore.
“Expansionary fiscal stance implies lower odds of an April MAS move, especially with growth and inflation having evolved in line with MAS’ expectations,” ANZ economist Weiwen Ng said. - Reuters
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