Written by Kok Shin-hui
SINGAPORE (Reuters) – Singapore is likely to focus on cost of living issues and jobs in next week’s government budget, with continued high inflation, slowing growth and geopolitical uncertainty a challenge for the trade-dependent economy. is a major concern.
Economists expect the fiscal situation to widen, with DBS forecasting an overall budget deficit of 0.4% of GDP and UOB forecasting a deficit of 1.2%.
It also expects a small surplus for the financial year ending March 31, rather than the initial S$400 million (0.1% of GDP) deficit, due to strong tax revenues. The budget is scheduled to be announced on February 16 by Finance Minister Lawrence Wong, who is also expected to be Singapore’s next prime minister.
Singapore’s inflation rate has fallen from a peak of 5.5% early last year, but remains above pre-pandemic levels at 3.3% in December.
The economic growth rate plummeted from 3.6% in 2022 to 1.2% in 2023. The Ministry of Trade predicts a growth rate of 1% to 3% in 2024.
The city-state’s population of 5.9 million people is also dealing with a 1 percent sales tax hike starting this year and a planned increase in water rates.
OCBC economist Serena Lin expects some relief measures introduced during the pandemic to continue, such as gift certificates to households that can be used for food and groceries.
Economists also expect an increase in cash payments and utility rebates.
The budget comes ahead of a planned leadership change, with Prime Minister Lee Hsien Loong saying he would hand over power to Mr Wong by November this year. Elections are expected to be held after a successor is installed, but Singapore must call elections by 2025.
Expected employment-related measures include unemployment benefits for laid-off workers and plans to help people maintain new skills and new needs as the labor market faces disruption from artificial intelligence. included.
Economists also want more details on the implementation of Pillar 2 of BEPS 2.0, an OECD project in which more than 140 countries have agreed to raise the minimum effective tax rate on large companies to 15%.
Mr Wong said last year that he intended to implement Pillar 2 from 2025, but would closely monitor the “fluid” international situation and adjust the schedule accordingly.
In Singapore, the current maximum interest rate is 17%, but some investors are paying effective interest rates as low as 4%. Mr Wong said last year that BEPS 2.0 would reduce Singapore’s ability to use tax incentives to attract new investments.
(Reporting by Xinghui Kok; Editing by Sam Holmes)