Budget 2022: S$3 billion deficit expected this year; S$6 billion to be drawn from past reserves

SINGAPORE: Singapore’s Budget will continue to be expansionary for the financial year 2022, with an expected deficit of S$3 billion or 0.5 per cent of Singapore’s gross domestic product (GDP).

This is necessary to continue support for the economy, said Finance Minister Lawrence Wong on Friday (Feb 18) as he delivered the Budget 2022 statement.

In his maiden Budget speech, Mr Wong had outlined a range of near-term aid for those affected by the COVID-19 pandemic and long-term measures to continue investing in the economy and workers, as well as strengthen social compact.

Revenue for 2022 is projected to be S$81.8 billion, which is S$1.4 billion or 1.7 per cent more than the previous year’s revised estimates.

This is largely due to slightly higher collections expected from corporate and personal income taxes, goods and services taxes and other taxes.

At the same time, the Government’s expenditure is also set to go up to S$102.4 billion – S$4 billion or 4.1 per cent higher than the revised 2021 figure.

The net investment returns contribution (NIRC), which has been the biggest contributor to government coffers, is set to bring in about S$21.6 billion in 2022. This will mark a 6 per cent increase over 2021.

Meanwhile for FY2021, the expansionary Budget is expected to clock an overall deficit of S$5 billion, or 0.9 per cent of GDP.

DRAWING S$6 BILLION FROM RESERVES

The Government will also draw on the reserves for the third consecutive year, as it plans to set aside S$6 billon to “maintain a multi-layered public health defence”.

This, according to Mr Wong, is necessary for the country to “react nimbly and confidently to the evolving COVID-19 situation”.

“Given the extraordinary nature of this pandemic, we will resource this COVID-19 public health expenditure for FY2022 from past reserves,” the minister said.

President Halimah Yacob has given her in-principle support for this, Mr Wong told the House.

Singapore first tapped on its reserves in FY2020, with the Government saying that it would draw up to S$52 billion in a move to protect lives and livelihoods from the impact of the COVID-19 pandemic.

The Government now expects to utilise a lower amount of S$31.9 billion for that financial year, Mr Wong said.

“This is the result of our swift and decisive response, which allowed us to avert worse public health outcomes. We saw a stronger-than-expected rebound in our economy and businesses, and did not need to utilise measures like loan loss provisions.”

Likewise in FY2021, the Government had planned to draw up to S$11 billion from past reserves for the COVID-19 Resilience Package. It now expects to draw a lower amount of S$5 billion, Mr Wong said.

The smaller amount, he added, is mainly due to a reduced expenditure of S$10 billion for the support package, under-utilisation of ministries’ expenditures due to projects being delayed by the pandemic, as well as one-off revenue upsides from vehicle quota premiums and stamp duties.

In addition, the Government had also tapped on existing resources to provide short-term relief when restrictions had to be tightened periodically last year.

For example, the S$2 billion worth of economic relief measures introduced during the periods of heightened alert last year was resourced through a reallocation of funds.

Meanwhile, the S$1.4 billion worth of support measures introduced during the “Stabilisation Phase” came from an advance from the contingencies fund. 

For that, Mr Wong said he will now replace the advances through the Supplementary Budget for FY2021.
 
Taken altogether, the total expected draw on past reserves over FY2020 to FY2022 is now S$42.9 billion.

“This cumulative draw is less than the initial draw of S$52 billion that the President originally agreed to for FY20. It reflects our prudence in the use of past reserves,” the minister said.

Mr Wong noted that Singapore’s spending needs will continue to grow beyond the crisis, as the country tackles structural shifts and invest more to deliver on longer-term priorities. 

“In order to meet new spending needs, besides raising revenue, we will continue to manage our expenditure growth,” he said.

To that, Mr Wong announced a further 1 per cent cut to the budgets of all ministries and organs of state for FY2023, on top of the 2 per cent cut in place since FY2017.

The cuts have ensured that the Government spends “judiciously and achieve good value-for-money outcomes”, he added, noting that funds from this adjustment will be channelled towards new priorities.