Economists say government could increase spending by S$10b
By Wong Siew Ying, Channel NewsAsia | Posted: 07 November 2008 2015 hrs

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SINGAPORE: Economists expect Singapore's government to increase its spending by up to S$10 billion next year.

Senior Minister Goh Chok Tong said on Thursday that the next budget will be an "expansionary" one, which means the government will be spending more and collecting less.

With corporate earnings hit by the economic slowdown, analysts said on Friday that the private sector will scale back significantly on spending and investment.

Song Seng Wun, CEO & regional economist, CIMB-GK Research, said: "Financing is not a problem. Since the new term, the government has been able to record fairly substantial surpluses and with the change in constitution, it allows them to dip into reserves. They do have a larger war chest to deal with this downturn."

One way to pump-prime the economy is to keep infrastructure projects flowing.

Market watchers said the government is likely to start public sector projects which were deferred earlier. About S$4.7 billion worth of projects were held back till 2010 to ease pressure on the construction sector.

The government is also expected to inject more funds into the research and bio-medical sector, which is likely to create more jobs.

Analysts said the government could also help individuals and companies by offering tax incentives. They do not rule out a reduction in the Goods and Services Tax (GST), which will go some way to help lower the cost of living.

Older workers, in particular, may be given an extra lift through the Workfare Bonus Scheme – a programme to encourage low-wage workers to take on jobs.

Heng Chee How, deputy secretary-general of NTUC, said: "In a recession, it (workfare bonus) is something that you could look at because cash flow is something that workers are also concerned about."

Analysts said needy families are also likely to get more assistance through a range of rental and utility rebates.

On the whole, they expect many of the potential budgetary measures to be one-offs, designed to help cushion the impact of the downturn.


- CNA/so