SINGAPORE: The Government expects Singapore’s revenue position to remain weak for a number of years due to the impact of COVID-19 on the global and local economy, said Deputy Prime Minister Heng Swee Keat in Parliament on Monday (Oct 5).
At the same time, expenditure will rise as authorities continue to provide support for residents and businesses, he noted.
"This challenging fiscal position is a result of a global pandemic that no one could have predicted. What is within our control is how we use our fiscal resources well to respond to this crisis and to prepare for the future," said Mr Heng.
Delivering his ministerial statement on Singapore's response to the COVID-19 crisis, Mr Heng said close to S$100 billion has been set aside for support measures.
He cautioned, however, that the country must be mindful about the way it spends.
“We must be careful not to spend in a way that squanders what generations before us had painstakingly built up,” said Mr Heng who is also Finance Minister.
“Our guiding principle is prudence, not austerity. We will continue to invest decisively in our national priorities, with a deep commitment to leave behind a better future for our children."
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Mr Heng noted that the Government is bearing a significant part of the economy-wide adjustment during this crisis, as its revenues have fallen while it makes “substantial transfers” to households and businesses.
Revenue collection is expected to fall across all categories of revenue. For instance, GST collections are likely to fall by 14 per cent compared to estimates made at the start of the year, Mr Heng said.
New measures and extensions to several support initiatives were announced on Monday, and they fall within the S$8 billion spending stated in August, said the minister, as the extra expenditure will be funded by reallocating money from areas where spending went down, such as development projects that have been delayed due to COVID-19.
This means there is no additional draw from the reserves for the latest round of measures, and the total draw on the reserves remains within S$52 billion.
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According to a statement from the Ministry of Finance, Singapore’s overall budget balance for FY2020 is projected to hit a S$74.2 billion deficit.
Operating revenue is expected to be S$63.7 billion, which is S$5.1 billion - or 7.4 per cent - lower than the revised estimate presented at May’s Fortitude Budget, mainly due to a more subdued economic growth environment arising from COVID-19 and lower economic activity during the “circuit breaker” period, the finance ministry said.
And compared to estimates given at February’s Unity Budget, the operating revenue will likely come in at S$12.3 billion or 16.1 per cent lower than what was initially calculated.
“We expect our revenue position to be weak for a number of years, as the effects of COVID-19 on the global economy linger, and our economy slows,” Mr Heng said.
“At the same time, our expenditure will rise as we continue to provide support for our people and businesses."
He stressed that much work needs to be done to develop Singapore’s economy and society. The country will have to find ways to fund its growth sustainably through higher taxes and “more effective spending”, he said.
“These are difficult choices, but we must meet them head-on,” he said.
"We will also maintain a disciplined and judicious use of borrowing, reserving its use for long-term infrastructure whose benefits are spread across many generations."
Mr Heng warned that other countries’ governments have committed trillions of dollars in response to COVID-19, and their debt levels have risen to record highs, which will take “generations to pay off”.
“We have avoided this outcome, because successive generations have built up strong reserves ahead of this crisis,” he said.
“We must have the discipline to start earning, saving, and investing for the future again,” he added. “COVID-19 is not our first crisis, and certainly will not be the last.”