Singapore’s elderly are primed to benefit from a generous budget unveiled next week, analysts say, as the government prioritizes the needs of a fast-ageing population ahead of an election expected as soon as this year.
As pressure grows on more of the elderly to stay in the workforce beyond retirement age, the low-tax finance hub is set to try and assuage rising social angst over the welfare of a generation born near the end of British colonial rule when Singapore was a basic port town.
The Feb 18. budget, due to be delivered by Finance Minister Heng Swee Keat, will be his first since he was picked last year as the likely next leader of the People’s Action Party which has governed the affluent city-state for over half a century.
“Expectations are for a spending spree ahead of a reported early election later this year,” said Bank of America Merrill Lynch’s ASEAN economist Mohamed Faiz Nagutha.
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.
Analysts say other highlights of the budget for fiscal year 2019 that begins April 1 will likely include increased security spending given a recent high-profile cyber attack, maritime tensions with Malaysia and plans to acquire F-35 fighter jets. A new sugar tax, higher alcohol levies and more e-commerce taxes are also seen as possibilities.
While Singapore budgeted for a small deficit in fiscal year 2018, analysts at Maybank Kim Eng said their estimates for an accumulated S$19 billion fiscal surplus over the last three years provides “ample room for more social spending”.
Other analysts say increased spending is also 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.
“Notwithstanding the prospect of a pre-election budget, the need remains for Singapore to stay business relevant and education supportive amidst the ongoing uncertainties in the global economic space,” UOB economist Barnabas Gan said, adding the budget needs “to lean towards an expansionary stance.”
Schemes to retrain and upskill workers, especially older staff and those facing technological disruption, will also likely feature in the budget, analysts say.
Giveaways to households, direct or through rebates, historically occur before elections. But the government has marked Singaporeans born in the 1950s – the so-called Merdeka or ‘Independence’ generation – for special treatment this year.
With the second-fastest ageing population in the world after South Korea, Singapore is growing more reliant on older residents staying in the workforce beyond retirement age as birth rates fall and foreign labour is restricted.
But many complain the government’s retirement savings scheme does not provide enough money in a country often ranked as the world’s most expensive and where life expectancy is close to 83 – the third highest globally.
Ahead of the 2015 election – which the PAP won comfortably – a “Silver Support” scheme was introduced to provide regular payouts to low income pensioners, while a S$9 billion “Pioneer” scheme was unveiled for all Singaporeans born in 1949 or before to help meet their healthcare costs.
Analysts think a similar amount will be set aside for the Merdeka generation – in what Maybank Kim Eng in a note said would be the “centerpiece” of the fiscal 2019 budget.
While the welfare needs of its ageing population has put a strain on Singapore’s low tax model, little is expected in terms of tax changes given last year’s announcement that goods and services taxes (GST) will increase between 2021 and 2025.
However, with a so-called ‘Netflix tax’ on digital services set to come in next year, some analysts expect imports of online goods to soon be taxed as purchases on the likes of Amazon and Alibaba’s platforms surge.
A sugar tax – already adopted in France, Britain, Thailand and the Philippines – is also seen as a possibility given Singapore’s high rates of diabetes, as is another increase in alcohol tax which was last raised five years ago.