- The Straits Times
Singapore unveiled an expansionary budget for the next financial year on Monday, setting aside S$6.1 billion for the welfare of its elderly in a generous package before an election expected as soon as this year.
Finance Minister Heng Swee Keat also announced a S$1.1 billion bonus package for all Singaporeans to mark 200 years since the former British colony’s founding, that includes vouchers, a cash bonus for lower income workers and income tax rebates for the middle class.
The government finance for the 2019 fiscal year that begins April 1 is expected to turn to a deficit of S$3.5 billion, after a predicted surplus of S$2.1 billion for the 2018 fiscal year.
The budget proposal comes after data showed Singapore’s economy grew at its slowest pace in more than two years in the fourth quarter, and its trade ministry warned that manufacturing is likely to face significant moderation this year.
Analysts have said stronger fiscal impulse will also be needed to tackle heightened external pressure on the economy, including from the US-Sino trade war and Britain’s imminent departure from the European Union.
Singapore must hold its next general election by early 2021, but Prime Minister Lee Hsien Loong, eyeing retirement, has suggested it could be this year.
“The Merdeka Generation Package is a gesture of our nation’s gratitude for their contributions and a way to show care for them in their silver years,” said Heng, who been tapped to be the next leader of the People’s Action Party which has ruled the city-state for over half a century without interruption.
The so-called Merdeka, or “independence” generation refers to those born in the 1950s, near the end of British colonial rule. With the second-fastest aging population in the world after South Korea, and as pressure grows on more of the elderly to stay in the workforce beyond retirement age, the low-tax finance hub is facing rising social angst over the welfare of its aged.
Heng said about 30 per cent of Singapore’s total budgeted expenditure for the 2019 fiscal year will support defence, security and diplomacy efforts and the quota for foreign workers in the services sector will be reduced in coming years.
Among other budget highlights was a hike in excise duty for diesel to 20 Singapore cents per liter from 10 cents with immediate effect.
EXPENDITURE – To set aside about 30 per cent of its total expenditure this year to support defence, security, and diplomacy efforts
BUDGET FORECASTS – FY2018 overall budget surplus seen at S$2.1 billion, or 0.4 per cent of GDP – FY2019 overall budget deficit seen at S$3.5 billion, or 0.7 per cent of GDP
PRODUCTIVITY AND MANPOWER – Automation support package will be extended by two years – To reduce quota for foreign workers in services sector in coming years – Firms can continue to apply for additional manpower in some cases. On a case-by-case basis, firms can bring in foreign workers with specialised skills that are in demand globally. – Expect to spend S$4.6 billion over the next three years on new and enhanced economic capability-building measures, with S$3.6 billion going towards helping workers “thrive amid industry and technological disruptions”
SUPPORT PACKAGE – To set aside S$6.1 billion ($4.5 billion) Merdeka Generation Fund to support elderly Singaporeans, including help to save for their healthcare needs. Package to benefit close to 500,000 Singaporeans. – To introduce S$1.1 billion ‘Bicentennial Bonus.’ Bonus will include additional help with daily expenses for lower income Singaporeans through vouchers and a 50 per cent personal income tax rebate capped at S$200 for the year of assessment 2019.
TAXES – To raise excise duty for diesel to 20 Singapore cents per litre from 10 cents – Carbon tax to be applied on this year’s emissions – Reiterates will raise goods and services tax (GST) by 2 percentage points sometime in the period from 2021 to 2025. Pledges to cushion impact of increase through GST offset package.
INFRASTRUCTURE – Government to provide guarantee for borrowings by Changi Airport Group related to Changi East airport expansion project – Studying option of using government debt as part of financing mix for long-term projects handled directly by the government.