Financial package to cushion impact of rising prices

THE Singapore government is expected to cut personal income taxes and announce a financial package to cushion the impact of rising prices and slowing economic growth in its 2008 budget, analysts said. 

Finance Minister Tharman Shanmugaratnam is likely to announce tomorrow an “inflation offset package” aimed at helping primarily the poor and elderly cope with rising living costs, they said. 

“This year's budget will be closely watched,” Citigroup economist Kit Wei Zheng said. 

Singapore, South-East Asia's most advanced economy, grew 7.5% last year. The stock market sizzled to record highs and companies reported robust earnings. 

But with some economists saying the United States is in a recession, the government forecasts Singapore's trade-reliant economy to expand at a slower clip of 4.5% to 6.5% this year. 

While salaries increased and a record number of workers were employed last year, many Singaporeans and foreign residents saw their purchasing power eroded as soaring crude oil prices drove up the costs of food and other items. 

Prime Minister Lee Hsien Loong was quoted earlier this month as saying inflation could exceed 5% this year, compared with 2.1% in 2007. 

“Against a backdrop of intensified downside risks to growth and sharply higher inflation, the thrust of the budget will be to aggressively tackle issues related to costs of living and business competitiveness,” Kit said. 

“Given buoyant government revenues, we expect a generous budget, with large transfers and rebates to offset higher costs of living, possible cuts in income tax rates and other measures to lower business costs.” 

The government is expected to end the financial year with a surplus instead of a deficit, which it had earlier projected, analysts said. 

Hoe Woei Chen, an economist with United Overseas Bank (UOB), expects a personal income tax rate cut to 18% from 20%. – AFP  

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