Singapore’s budget on Tuesday is expected to offer more targeted measures to support the economy’s recovery from its worst year since independence, setting up a third straight budget deficit for the traditionally fiscally conservative city-state.
While the the nation appears past the worst of the pandemic and its spending shortfall is narrowing, industries including food and beverage and those associated with travel remain crushed by mobility restrictions. Firms are also still grappling with restructuring staffs and supply chains.
“Certain sectors are still struggling with weak demand, high operating costs and manpower constraints and may require continued policy assistance,” Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. in Singapore, said in a Feb. 5 report. “Some of these support measures are gradually reaching the end of their shelf life, but a premature full-scale withdrawal is also unlikely in order to forestall a ‘cliff effect.’”
The spending plan for the year starting April 1 may result in a budget deficit equivalent to 4% of gross domestic product, according to the median estimate in a Bloomberg survey of economists.
While this would mark a third straight year of shortfalls, it’s quickly narrowing from 2020’s record deficit, which is estimated to come in 15.5%. That number had ballooned last year from the government’s initial projection of 2.1% as the severity of the pandemic’s impact triggered multiple stimulus pledges.
“Targeted” is the watchword in the new budget as officials balance additional support for vulnerable businesses and households against long-standing caution on debt management. The government already pledged about S$100 billion ($75.6 billion) on pandemic-related stimulus, with approval to fund about half of that from past reserves.
Bigger questions lie on the revenue side, with a planned increase in the goods and services tax after 2021 potentially delayed, while other duties might be levied to offset higher spending.
Six of the 12 analysts polled by Bloomberg through Feb. 11 said the single-most urgent economic need for the budget to address was supporting small- and medium-sized enterprises to ensure that the whole economy recovers.