Singapore’s Budget to Feel Virus Strain for Years, Deputy PM Says

(Bloomberg) -- Singapore’s budget will likely be challenging for a number of years as officials look to balance fiscal sustainability with generous aid amid a long recovery, and signaled that higher taxes may be on the line.

Operating revenues this financial year will probably be 16% lower than the government estimated in February, Deputy Prime Minister Heng Swee Keat said in an address to Parliament Monday. That’ll mean less money coming in, even as the government pledged to spend to help households and businesses during what’s set to be the worst recession since independence.

“We expect our revenue position to be weak for a number of years, as the effects of Covid-19 on the global economy linger, and our economy slows,” said Heng, who is also the finance minister. “We will have to find ways to fund these sustainably -- higher taxes, and more effective spending.”

Singapore has pledged about S$100 billion ($73.4 billion) in stimulus measures to fight the effects of the pandemic, separated in five announcements through mid-August that included wage subsidies, digital transformation initiatives, re-skilling operations and cash grants.

The government is projecting a budget deficit of S$74.2 billion for this fiscal year after earning presidential approval to draw some S$52 billion from past reserves to fund the virus aid. Heng said Monday that the total draw on past reserves remains within that amount. The government now estimates operating revenue will be S$63.7 billion, S$12.3 billion lower than projected in February, according to Ministry of Finance data.

Here are other details from Heng’s speech, where he announced some extensions of stimulus measures:

• For new hires, government has been offering co-funding of the first S$5,000 of gross monthly wages for up to 12 months; for September through February, this will also now include as much as 50% for new hires of persons with disabilities
• Six-month extension, to June 30, 2021, for training support package, with enhanced course fee subsidies for hardest-hit sectors
• Extension to September 2021 for Temporary Bridging Loan Programme to provide working capital for business needs

Earning, Saving, Investing

The fiscally conservative city-state tapped its reserves this year for the first time since 2009, raising questions about how quickly officials will feel the need to refill those coffers -- and when a planned increase in the goods and services tax, or GST, will take place, after the government said it wouldn’t happen next year. Already, Heng said GST collections for this financial year will likely be down by 14% compared to earlier estimates.

Heng on Monday acknowledged that Singapore is unique in not racking up debt, compared with governments worldwide whose trillions of dollars in pandemic-related stimulus are straining budgets and credit ratings. But he also struck a tone of fiscal responsibility.

“We must have the discipline to start earning, saving, and investing for the future again,” he said.

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