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Budget 2019 likely to be generous and expansionary: Maybank Kim Eng economists

BUDGET 2019 will likely be generous and expansionary, setting the stage for a possible early general election, according to a report by Maybank Kim Eng.

With overall fiscal surpluses from the last three years adding up to over S$19 billion, there is “ample fiscal room” to boost pre-election and social spending, said economists Chua Hak Bin and Lee Ju Ye, who are the authors of the report.

For fiscal 2019's Budget, they expect the government to register an overall deficit of around 1.5 per cent of gross domestic product (GDP). This is up from its FY2018 forecast of a fiscal primary deficit at 0.9 per cent of GDP, compared to the government’s estimate of a 1.6 per cent deficit.

The centrepiece of the Budget is likely to be the Merdeka Generation Package – estimated to cost about S$8 billion – that could boost consumer spending as seen in the recovery of retail sales after the Pioneer Package was introduced in 2014, they said.

The Merdeka Generation Package for Singaporeans born in the 1950s was introduced by Prime Minister Lee Hsien Loong during the 2018 National Day Rally. There are 460,000 Singaporeans in the 60 to 69 age group, accounting for around 13 per cent of total citizens.

In addition, economists expect more funding to be allocated to national security and defence, including cybersecurity.

Delays in the Kuala Lumpur-Singapore High Speed Rail may accelerate the construction of the Thomson-East Coast, Jurong Region and Cross Island Line, they said. Funds also may be set aside for infrastructure projects to prepare for rising sea levels and climate change.

According to them, major tax increases are likely, given the stronger than expected tax revenue growth and prospects of early elections.

“We would like to see some targeted relaxation of foreign manpower or immigration policies given the acute labour market tightness and cost pressures in certain segments,” said the economists.

But they believe this will be unlikely given its sensitivity in the run-up to elections. Stricter foreign manpower policy is hurting growth prospects and constraining companies from expanding and investing, they argued.

In Budget 2019, foreign worker levies for offshore marine and processing will likely be raised by about S$50 to S$100 per month, after being deferred last year, they said.

“Generous handouts” for lower and middle-income segments and some tax reliefs for small and medium-sized enterprises may also be in the cards, they added.