SINGAPORE: A bigger overall budget deficit of S$10.9 billion is expected for the financial year (FY) 2020 as Singapore plans for a “more expansionary” budget to give its economy a boost amid near-term uncertainties, said Deputy Prime Minister Heng Swee Keat on Tuesday (Feb 18).
The estimated deficit, which amounts to 2.1 per cent of gross domestic product (GDP), exceeds 2009's S$8.7 billion forecast deficit when the economy went through a rough ride due to the global financial crisis. That 2009 estimate was later revised to a S$0.82 billion deficit.
“In the coming year, the Singapore economy faces considerable uncertainty because of heightened risks in the global economy and the rapidly evolving COVID-19 outbreak,” he said in his Budget statement.
“Hence for FY2020, our budget position will be more expansionary.”
Together with the S$4 billion Stabilisation and Support Package, Mr Heng said this will serve as a “considerable fiscal boost” to the economy to address near-term concerns.
He also noted that the Government’s fiscal prudence since the beginning of its term has helped it to accumulate sufficient fiscal surplus to fund the overall deficit in FY2020.
“There is no draw on past reserves,” said Mr Heng, who is also Finance Minister.
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Total spending by the ministries in FY2020 is estimated to hit S$83.6 billion, or 16.1 per cent of GDP – the biggest expenditure to date.
This marks an increase of S$5.4 billion from the previous year, mainly on the back of higher spending on healthcare, national development and transport.
In particular, the Ministry of Health’s expenditure will jump by S$1.9 billion to S$13.4 billion, making it the ministry with the second-biggest spending after defence (S$15.1 billion).
The increase – the greatest among all ministries – is due to higher subsidies for public and subsidised private healthcare institutions, plans and measures for the mitigation of the spread of COVID-19, as well as development of infrastructure projects such as Woodlands Health Campus and other IT projects.
Higher housing grant disbursements and more spending on HDB upgrading programmes will also bump up the expenditure for the Ministry of National Development. In this case, the ministry’s expenditure is expected to rise from S$3.6 billion to S$4.5 billion.
The Ministry of Transport will also be spending more – an increase of S$0.7 billion to S$10.9 billion – on MRT development projects.
These will be offset by reduced expenditure from the Ministry of Trade and Industry, falling to S$3.8 billion from S$4.3 billion, on the back of lower requirements for development expenditure. This as support for businesses and workers prescribed under the Stabilisation and Support Package will mostly be funded through special transfers.
This means that special transfers including top-ups to endowment and trust funds will increase to about S$22 billion for FY2020.
Operating revenue is projected to rise S$1.3 billion from the year earlier to S$76 billion, or 14.6 per cent of GDP. Higher revenues from areas like statutory board contributions and collections of corporate and personal income taxes, are expected to be partially offset by decreases in vehicle quota premiums and motor vehicle taxes collections.
Revenue projection has also factored in a “more subdued economic growth environment” due to COVID-19. As some revenue collection lags economic growth, some of the impact will be felt in FY2021, according to documents from the Ministry of Finance.
Net investment returns contribution (NIRC) is estimated to total S$18.6 billion, up S$1.6 billion from the revised figure for FY2019.
SMALLER BUDGET DEFICIT FOR FY2019
For the current financial year that will end on Mar 31, 2020, Singapore will see a smaller-than-expected budget deficit due to lesser spending.
Total expenditure for FY2019 at S$78.2 billion is 2.6 per cent lower than the estimated S$80.3 billion. This as some ministries, such as defence and transport, spent less than earlier anticipated due to project delays and lower requirements for components under the bus contracting model.
Operating revenue for the year will total S$74.7 billion, about 0.3 per cent below the forecast of S$74.9 billion. Collections from goods and services tax (GST), motor vehicle taxes and vehicle quota premiums fell, although these were partly offset by higher-than-expected collections from statutory boards’ contributions, personal income tax and stamp duty.
Special transfers, and top-ups to endowment and trust funds, will come in as expected at S$1.7 billion and S$13.6 billion, respectively.
Meanwhile, NIRC at about S$17 billion will be about S$0.1 billion lower than the anticipated sum.
All these work out to a revised overall budget deficit of S$1.7 billion, or 0.3 per cent of GDP, for this financial year, compared to an S$3.5 billion deficit forecast a year ago.
REMAIN FISCALLY SUSTAINABLE
Singapore must continue to plan its finances based on long-term structural drivers, said Mr Heng.
He spoke about how exceptional statutory board contributions from the Monetary Authority of Singapore and increased stamp duty collections have helped revenue flows during this term of the Government. But such revenue surprises cannot be counted on, he said.
Singapore must also anticipate long-term spending needs and be disciplined to raise revenue ahead of time, while being mindful of the uncertainties to its revenue.
Apart from having an equitable fiscal strategy, which includes being disciplined in its use of borrowing, the country must also maintain its fiscal posture and “leave enough to deal with unexpected shocks and longer-term challenges, Mr Heng said.
The Government is required to maintain a balanced Budget over each term. Any budgetary surplus cannot be carried over to the next term of Government and will become part of past reserves.
“We are being prudent to preserve fiscal buffers to ensure that we have the wherewithal to stand our ground and bounce back quickly if the tide turns against us.
“This is how we have been able to respond decisively to fight the COVID-19 outbreak, and support Singaporeans and our workers,” said Mr Heng.
“And at the same time, to be able to set aside an Assurance Package for GST to help Singaporeans in the years ahead.”