Singapore expects to narrow its deficit from $2 billion for FY2022 to $0.4 billion for the coming FY2023, as the country puts behind funding required to deal with the pandemic, and focus more on tackling current macroeconomic challenges.
The $0.4 billion deficit approximates 0.1% of the GDP.
In FY2022, the country expects to draw $3.1 billion from its reserves to cope with the pandemic — just over half the $6 billion initially asked for.
This brings the total expected draw on reserves between FY2020 and FY2022 to $40 billion, which is lower than $52 billion allowed. Drawdowns of reserves require the President’s approval.
"As things have returned to normal, we will not need any draw on the reserves in this year’s budget," says deputy prime minister Lawrence Wong as he delivered this year’s Budget speech.
Wong cautions that Singapore remains in a “tight” fiscal position, as he unveils a slew of measures in his speech to tax more from high-end property and car buyers.
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“We will continue to uphold our practice of fiscal prudence and the principles that underpin the protection of our reserves,” he says.
While the pandemic is largely over, Singapore’s economy is seen to grow at a slower pace this year because of a mixed outlook of its major trading partners.
Singapore’s economy is seen to grow this year, but at a slower pace of between 0.5% and 2.5%, versus a growth of 3.6% last year.
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“For now, the picture is mixed and uneven,” says Wong.
For example, the Eurozone is still struggling with high energy costs and inflation; US businesses are still coping with higher interest costs imposed by the US Federal Reserve in its bid to fight inflation. China, likely to have put the peak of re-opening infections behind, is seen to help lift demand.
Nonetheless, Singapore’s fundamentals remain strong and the country’s reputation as a business hub remains intact, thanks to how the pandemic was handled.
“Our deep relationships with both the US and China as well as partners in Asean and the wider region make us an increasingly important place for global and regional businesses,” says Wong.
“We will take full advantage of these opportunities to attract new flows of investments, capital, talents and ideas and all these will add vibrancy to our economy and create more jobs for Singaporeans,” he adds.
