Singapore Budget deficit of S$3.5 billion expected for FY19

Singapore

A LARGER budget deficit of S$3.48 billion is expected for FY19, with expenditure expected to increase, Minister for Finance Heng Swee Keat announced on Monday.

Despite being the biggest deficit in dollar terms since FY15's S$4.05 billion, the FY19 deficit amounting to 0.7 per cent of gross domestic product (GDP) did not surprise economists. Standard Chartered Bank's Asia economist Jonathan Koh said that the current term of government can easily afford to spend more, having accumulated a surplus of S$17.9 billion over the past three financial years.

DBS senior economist Irvin Seah agreed, adding: "My hunch is that the next fiscal budget will be even more generous, given that an election will be coming up. This is definitely not an election budget."

Total spending by the ministries is projected at S$80.25 billion in FY19, or 1.6 per cent more year on year, mainly on the back of increased spending by the healthcare, defence and environment and water resource ministries.

Healthcare spending will grow to S$11.72 billion from S$10.63 billion on increased patient subsidies and expansion of clinical services and capacity. The Ministry of Health also expects to increase development spending on major IT projects and infrastructure projects such as the Woodlands Health Campus.

Higher military expenditure is expected to increase total spend by the Ministry of Defence to S$15.47 billion from S$14.76 billion.

These will be offset by decreased expenditure from the Ministry of Transport (MOT), falling to S$10.68 billion from S$11.74 billion. This is partly due to the suspension of the Kuala Lumpur-Singapore High Speed Rail Project. In addition, sufficient funds have been set aside for the Johor Bahru-Singapore Rapid Transit System link project.

However, MOT will spend more this year on enhancing public transport capacity and resilience.

Special transfers including top-ups to endowment and trust funds will more than double to S$15.3 billion from revised FY18 estimates of S$9 billion. The increase largely stems from the setting up of two new funds: the Merdeka Generation Fund of S$6.1 billion and the Long-Term Care Support Fund of S$5.08 billion.

Excluding top-ups to endowment and trust funds, special transfers will rise to $1.74 billion in FY19, from revised estimates of S$1.70 billion in FY18. They include components of a S$1.1 billion Bicentennial Bonus, such as payouts of S$150 to S$300 for about 1.4 million Singaporeans aged 21 and above this year, based on their assessable income and annual value of their home.

Operating revenue for FY19 is expected to hit S$74.90 billion, or a 1.7 per cent increase from the revised estimate for FY18. Higher revenues from corporate income tax and goods and services tax are expected to be partially offset by decreases in stamp duty collections and statutory board contributions.

Net investment returns contribution (NIRC) is projected to come in at S$17.17 billion, or 4.5 per cent higher than the revised figure for FY18. Excluding the government's top-ups to endowment and trust funds and NIRC, a basic deficit of S$7.09 billion or 1.4 per cent of GDP is expected for FY19.