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Coming: budget of celebration and challenges
THE Singapore government's budget for FY2015 - to be delivered in Parliament on Feb 23, Monday - will be no ordinary one. Even as a celebratory tone is struck, the social and economic challenges confronting Singapore will need facing up to, too.
Expectations run high for an expansionary budget, this being the year that Singapore celebrates 50 years of independence. That anticipation stems also from Budget 2015 being viewed as a pre-election budget. It could be the last before the next general election, due in 2016, is called.
Bank of America Merrill Lynch economist Chua Hak Bin expects Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam to table "a generous Jubilee Budget" with handouts extended to the middle class, and incentives to drive productivity stepped up.
The SG50 celebrations make this a good year "to share the fruits of sustained economic growth and prudent fiscal policy with Singaporeans", said DBS economist Irvin Seah.
"Similar to past pre-election budgets, larger transfers in the form of expanded Workfare, personal tax rebates or direct transfers such as the S$1.5 billion of growth dividends in Budget 2011 are likely," said Citi economist Kit Wei Zheng.
Economists thus widely expect a budget deficit that sets Singapore on an expansionary fiscal policy stance in 2015.
Citi's Mr Kit noted in a recent research note that the S$9.7 billion of surpluses accumulated in FY2012 and FY2013 will be more than sufficient to fund the projected S$1.2 billion FY14 deficit, without breaching the balanced budget rule. That states that the government must not run a fiscal deficit over its term of office, usually a five-year period.
Singapore's budget deficits typically end up smaller than projected, but even in the unlikely scenario that the FY14 projected deficit is met, that still leaves S$8.5 billion in cumulative surpluses that can fund FY15's budget, Mr Kit said.
In this "special year", UOB economist Francis Tan thinks that the government is unlikely to rock the boat too much in terms of measures to boost revenue collection - such as a goods and services tax hike or changes to income tax brackets. "Only after the elections do we expect the difficult question of how to pay for these programmes to be addressed," agreed Mr Kit.
However, Budget 2015 will need to confront some of the big challenges facing Singapore.
With the "distinct shift" in fiscal policy in recent years to strengthen social safety nets, DBS's Mr Seah expects a significant focus on social measures this year - particularly ones that address the challenges posed by Singapore's rapidly ageing population.
"There are many things about the external economic environment that are unforeseeable, and difficult to cater for, but the ageing population is a certainty. It is a good time to plan ahead," he said.
Indeed, details of the Silver Support Scheme to supplement the retirement savings of the needy elderly and help them cope with living expenses - first announced by Prime Minister Lee Hsien Loong at his National Day Rally last year - are due to be unveiled at Budget 2015. A panel tasked to review Singapore's Central Provident Fund system to make it more flexible and provide more options for retirement adequacy, will also submit its first findings to the government next month.
Budget 2015 also comes as questions are being asked of the economic restructuring push that Singapore embarked on in 2010 - so businesses and the economy will not be neglected, observers say.
Slower growth has already become the new normal. The Prime Minister has said that 2-3 per cent a year growth over the next decade would be "not bad" for Singapore - lower than the 3-5 per cent target set in 2010.
Also, five years on, productivity growth is still a long way from meeting the original goal of 2-3 per cent a year over the decade. For the first three-quarters of last year, productivity shrank 0.5 per cent.
This was the result of uneven productivity growth across sectors, an issue which came up at a pre-Budget 2015 dialogue with 40 business leaders, economists and academics on the Government Parliamentary Committee for Finance, Trade and Industry's resource panel on Wednesday. Participants suggested that policies to improve productivity should be more targeted and sector-specific, said a Ministry of Trade and Industry note on the meeting.
"I think that it is time to take a different approach," said DBS's Mr Seah, who thinks that Budget 2015 will mark a shift in the restructuring-related initiatives. "The second half will have to be very targeted, to look at specific industries, even specific companies. There should be more focus on enhancing the top line of the SMEs - such as innovation, R&D, helping companies to be first movers in their fields," he said.
At the companies and workers level, more details are also expected on Singapore's SkillsFuture push, announced last year as a national effort to help individuals make informed education, training and career decisions, develop a high-quality system of education and training and responds to industry needs, and promote employer recognition and career development based on skills and mastery of skills.
As business groupings and tax firms alike have started rolling out their annual wish lists, the Ministry of Finance yesterday said that members of the public too are invited to send in views and suggestions. Its feedback exercise on the Reach Budget website and Reach Singapore's Facebook page will close on Jan 29.
READ MORE: Recommendations from SME panel