SINGAPORE: The Republic will announce its Budget for financial year 2016/17 on Thursday afternoon (Mar 24) to spell out the Government's priorities over the coming year. It will be the first Budget announced by Mr Heng Swee Keat since he took office as Finance Minister last year, and it comes at a time of economic restructuring, with redundancies on the rise.
In 2015, services accounted for the bulk of job redundancies with overall layoffs hitting their highest levels since the 2009 global financial crisis. Amid the economic slowdown this year, observers said helping businesses cope with economic headwinds and keeping Singaporeans gainfully employed will likely be the key focuses of Budget 2016.
DBS Bank senior economist Irvin Seah, said it is important that companies are offered assistance to navigate difficult economic conditions, so as to safeguard negative impact on the labour market.
“If Singapore does face recession risks, then there is a chance of a broad-based retrenchment. That’s the last thing policy makers would want or hope for,” he said. “The Budget would be a good opportunity for them to lay out some safeguards to prevent that from happening.”
Mr Seah also said that while Singapore is not "dipping into an outright recession scenario" as yet, the risk is still there. “So, saving the companies means saving jobs for Singaporeans,” he added.
This year's Budget is expected to have a strong focus on the economy deviating from the trend in the last few years, where social spending had been on the rise. Economists told Channel NewsAsia they expect to see measures aimed at helping firms cope with cost pressures, and keeping liquidity lines open amid slower growth. Still, they say it is unlikely to detract from medium-term priorities like innovation and internationalisation.
Said Mr Seah: "If the risks rise, then banks may be less willing to lend and companies may potentially face a credit crunch. However, if the Government is able to come in and share part of the risk, this would actually lighten the risk factor on the banks, and henceforth reduce the credit crunch problems for companies."
PRUDENT APPROACH FOR A START
Tax experts also said the Government is expected to adopt a prudent fiscal stance, this being the first year of a new term.
“They'll probably want to save some ammunition for the future years,” said Daniel Ho, tax partner at Deloitte Singapore. “If the economy really turns bad, there are still opportunities to have off-Budget support packages and they've done it historically as well. So, it's still possible to try and provide some support outside of the Budget framework.”
Based on DBS and OCBC's projection, a small fiscal surplus of up to 0.4 per cent of nominal GDP could be forecast, amid slower growth and inflation outlook weighing on both revenue and expenditure.
Mr Ho noted that steps have already been taken to prepare for future spending needs. In previous Budgets, the Government introduced more progressive vehicle, property and income tax measures. It also included investment firm Temasek in the Net Investment Returns framework, which is expected to contribute revenue of about 1 per cent of GDP, or almost S$4 billion.
Said Mr Ho: "They've tried to increase revenue streams in the past few years, so they've made the tax system more progressive … Those earning between S$160,000 and S$320,000 of chargeable income will see their Personal Income Tax going up by about 1 to 2 per cent."
Apart from economic priorities, the finance minister has said some resources will be set aside in the upcoming Budget to support more ground-up initiatives that build on the spirit of SG50.