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Focus on economy in upcoming Budget welcomed by analysts

Economists say a strong focus on the economy in the upcoming Budget is timely, given the pressures which Singapore companies face during a period of slower growth. 

SINGAPORE: Economists have responded positively to remarks by Finance Minister Heng Swee Keat on Friday (Mar 4). 

The minister had said that the Government will focus more on the economy in Budget 2016. 

In response, economists said a strong focus on the economy in the upcoming Budget is timely, given the pressures faced by local companies during a period of slower growth.

The Pioneer Generation Package announced in Budget 2014 will provide about S$9 billion to fund healthcare needs of the elderly in Singapore, spread out over the coming years. The package, along with other social safety nets, have been at the fore of recent Budgets.

Since 2012, social spending as a percentage of total expenditure has been on the rise, while spending on economic development has dropped slightly.

However, Mr Heng has said that the upcoming Budget will help firms cope with short-term challenges and take advantage of medium-term growth opportunities.

"On a relative basis, the emphasis might shift towards shorter term priorities such as keeping people, more Singaporeans gainfully employed, even as growth slows, and also help measures for households in need and smaller firms in need as well,” said Mr Leong Wai Ho, a senior regional economist at Barclays.

“If the pace of retrenchments increases, that becomes a priority as well, to alleviate the pain as well, to retrain the workers, to put in place mechanisms that cost money to retrain workers, to adapt them to other parts of the economy that are still growing. Those sorts of expenditure will probably come to the fore in a year like this,” he added.

Economists also welcomed Mr Heng's remarks about being prudent with the Budget, given that it is the first year of the current Government's term. Past surpluses from the previous term of Government are locked in reserves.

Said Mr Francis Tan, an economist at UOB: "Credit rating agencies will also want to look at how the new term of Government is managing the income and expenditure of a nation. So I guess the first year is a very important signal to the world that yes, we may be seeing slower economic growth, yes we may be seeing higher business costs in terms of higher labour costs.

"But we can still put the house in order because we can still maintain fiscal prudence we've been seeing over the past 50 years from the predecessors."

According to BMI Research, the fiscal accounts are expected to return to surplus this year, of about 0.2 per cent of GDP. This is compared to the 2015 Budget, which is estimated to be in deficit of about 0.5 per cent of GDP.

Budget 2016 will be Mr Heng's first since he assumed the finance portfolio last year.