SINGAPORE, March 24 — Singapore announced support for its battered offshore marine sector and small businesses in its new budget, but did not make big stimulus moves for an economy that’s slowing but still expected to grow this year.
Finance Minister Heng Swee Keat decided not to change property-ooling measures that have hit demand and pulled down home prices in one of the world’s most expensive markets.
Heng said the government expects an overall budget surplus of S$3.4 billion (RM9.9 billion), or 0.8 per cent of gross domestic product in fiscal 2016/17, which begins on April 1.
Spending is expected to rise S$5 billion from the current year, an increase of 7.3 per cent.
For the just-ending fiscal year, during which Singapore had a general election, a budget deficit of S$4.9 billion is expected.
The minister told parliament the economic slowdown is causing anxiety.
We must not let pessimism take hold, lest it creates self-fulfilling expectations.” — Finance Minister Heng Swee Keat
“Many of our firms are facing weaker top-line growth, rising manpower costs and tighter financing,” he said. “Workers are anxious as retrenchment has increased, including among professionals.”
He added: “We must not let pessimism take hold, lest it creates self-fulfilling expectations.”
Singapore, an island of 5.5 million people with no natural resources, has transformed into a global trade and financial centre. But the city-state’s small and medium-sized businesses are facing the brunt of a global economic slowdown, compounded by moves to contain the number of foreigners getting work permits.
The budget speech came as Singapore’s trade-reliant S$402 billion economy faces lacklustre growth prospects. The budget made no changes to its low personal income and corporate tax rates, while unveiling a S$4.5 billion plan to transform and grow companies.
“The focus of the budget seems to be very skills- and innovation-driven for companies and Singaporeans,” said Selena Ling, an economist at OCBC Bank. “Maybe they are keeping powder dry in case a recession hits in future.”
Heng said the government continues to expect growth of 1.0 to 3.0 per cent this year. Growth last year slowed to 2.0 per cent, the weakest since 2009.
Impact on monetary easing?
The planned rise in spending will be supported by increases in operating revenue as well as higher net investment returns contributions, he said.
The budget’s fiscal measures will provide some support to the economy, said Weiwen Ng, an economist for ANZ.
“This effectively removes the near-term catalyst for easing by the central bank in April,” Ng said.
Given a run of weak economic data, some analysts have said they expect the Monetary Authority of Singapore (MAS) to ease monetary policy further at its scheduled meeting in April.
To help the marine and process industry, Singapore will defer levy increases for work permit holders in the sectors for one year.
“The extended downturn in oil and other commodity prices is affecting commodity-related activities, particularly the marine and offshore sector,” Heng said.
Singapore’s large rig industry, dominated by Keppel Corp and Sembcorp Marine, is facing cancellations and a dearth of new orders.
To help small and medium-sized enterprises, the budget proposed to raise rebates for two years on corporate income tax to 50 per cent of tax payable from 30 per cent, with a cap of S$20,000 for each year. — Reuters