S’pore plans cautious budget with an eye on election

SINGAPORE: Singapore Finance Minister Heng Swee Keat will aim to strike a delicate balance in today’s budget: preaching fiscal prudence while doling out more social spending ahead of elections that could come as early as this year.

While not expected to be as headline-grabbing as last year – when Heng flagged a hike in the goods and services tax – the 2019 budget will cover a range of familiar policy priorities. Infrastructure spending, more healthcare support for a rapidly aging population, and help for firms transitioning in a digital economy were top-of-mind for Heng in a Jan 22 interview.

The global backdrop calls for more caution. Weaker demand and US-China trade tensions saw Singapore’s export-reliant economy grow at a slower pace than expected in the fourth quarter, data showed last Friday.

“Expectations for a spending spree are high on past surpluses, likely elections and downside economic risks,” Mohamed Faiz Nagutha, an economist at Bank of America Merrill Lynch in Singapore, said before the data was released.

Those expectations should be reined in since the economy “is not in a crisis,” he said.

The budget deficit could be smaller than projected thanks to improved tax collection. Faiz sees a shortfall of 0.6% of gross domestic product in the primary balance, versus the government’s 1.6% estimate.

“Merdeka” will be the word of the day. That refers to a big portion of the population that came of age during Singapore’s independence era in the 1960s, and which the government plans to support through insurance subsidies, top-ups for medical savings programmes, long-term care funding and other goodies.

Having already rolled out similar assistance for the elder Pioneer Generation in fiscal 2014, the larger Merdeka Generation of almost a half-million citizens could benefit from about S$8bil in fresh spending, according to an estimate by economists at Maybank Kim Eng Research Pte Ltd in Singapore.

The support is in line with the government’s messaging on ensuring the city state thrives even as its population ages at one of the fastest rates in Asia.

Heng and other officials have reiterated that they’re “not done building Singapore.” Last year’s infrastructure component of the budget was quite broad, including the formation of a new government agency dedicated to acting as a broker for the region’s much-needed development projects.

This year, we’re likely to see more housing than road-and-rail: Lee has already flagged more spending to revamp public housing, and the budget might build on those schemes.

Since the introduction of housing curbs in mid-2018 to damp price increases, some homeowners have found it difficult to sell their properties. Look for some form of resale support, Citigroup Inc said on Feb 7. — Bloomberg

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