Cost of living may prompt more top-ups, transfers for families in Budget 2024
MORE handouts to households are likely to come in Budget 2024, said economists, as high inflation and sluggish wage growth continue to weigh on Singaporeans.
Some S$1 billion to S$2 billion might be “doable”, said OCBC chief economist Selena Ling, noting “no pandemic or recession risk” that would necessitate greater generosity than that.
“Gross domestic product growth prospects are anticipated to improve in 2024, and there is no immediate urgency to do more as inflation is easing,” she said.
Special transfers to households amounted to more than S$2 billion in each of the last two Budgets as Singapore emerged from the Covid-19 pandemic, “so the bar is set very high”, noted Ling.
If Budget 2024 is meant as a generous pre-election one, then over S$2 billion in handouts could be possible, she added, though it is “hard to say”.
The government will take into account not just inflation, but also job market conditions and “sentiment feedback on the ground on the pain points”, she said.
UOB associate economist Jester Koh also expects Budget 2024 to have cost-of-living relief measures “broadly similar in magnitude” to last year’s.
This is with nominal wage growth expected to moderate as the labour market eases, while headline and core inflation “remain above long-term historical averages” despite cooling. UOB estimates headline inflation of 3.5 per cent in 2024, down from 4.8 per cent in 2023, and core inflation of 3 per cent, against 4.2 per cent previously.
Targeted help
Median income fell 2.2 per cent in real terms in 2023, on a slowdown in nominal income growth, recent Ministry of Manpower data showed. Income at the 20th percentile fell 3 per cent in real terms, or 2 per cent after accounting for the Workfare Income Supplement and related payments.
Still, Chua Yeow Hwee, assistant professor in economics at Nanyang Technological University, said that “Singaporean households have done fairly well”, with the average household still expected to see its net worth stay relatively stable in 2024.
Yet with price pressures enduring, “more support could be given to the low-income households in terms of managing their cost of living”, he added.
The average household could get less direct support, and lower-income groups more, under a targeted approach, he suggested.
Watchers also expect more Community Development Council (CDC) Vouchers to be disbursed in Budget 2024. The scheme was launched in the first pandemic year of 2020.
Prof Chua cautioned that “it is not sustainable to give every household in Singapore such vouchers”, but added that these vouchers will likely “play a more significant role in mitigating the cost of living for low-income households” in the near term.
“Besides liquidity, these vouchers allow households the ability to make choices based on their individual needs and preferences,” he noted.
OCBC’s Ling added that CDC Vouchers “may become a permanent feature” of household support. Not only do they help with the cost of living, but they are also popular, easy to understand and digitally administered, she said. They also benefit local businesses, especially smaller heartland merchants.
Besides CDC Vouchers, transfers to households can take other forms, said watchers. These include special payments through the GST Voucher scheme, cash rebates for school bus fees, public transport vouchers, and top-ups to Child Development Accounts, Edusave accounts, and Central Provident Fund accounts.
There is a precedent for such transfers in the existing Assurance Package, which was introduced in 2020 with an initial S$6 billion set aside to cushion the impact of goods and services tax hikes. This has been enhanced several times, bringing the total to more than S$10 billion.
Indeed, Budget 2024 could bring further additions to the Assurance Package.
Said UOB’s Koh: “Further support for households could take the form of an enhancement to the cash disbursements or U-Save utility rebates under the Assurance Package, alongside a possible one-off cost-of-living special cash payment in FY2024.”
DBS economist Chua Han Teng also expects additions to the Assurance Package, noting “room for a slight expansionary budget for FY2024”, with a projected overall fiscal deficit of S$3 billion or 0.4 per cent of GDP.
“Positive surprises in fiscal performance in the earlier years of the current government’s five-year term provide some near-term fiscal flexibility,” he said. Singapore is constitutionally required to balance its budget over each five-year term of government, with the next general election to be called by November 2025.
