Singapore’s 2024 budget to focus on jobs and cost of living relief

Singapore is expected to focus on cost-of-living issues and employment in the government’s upcoming budget which is to fall just after the Chinese New Year.

The budget will be announced on Feb 16 by finance minister Lawrence Wong, who is also set to be Singapore’s next prime minister.

Currently, the country’s sticky inflation, slow growth and geopolitical uncertainties hang as key concerns for the trade-reliant economy.

Economists project the fiscal position to be expansionary, with DBS expecting to expect an overall fiscal deficit of 0.4% of GDP, and UOB estimating a deficit of 1.2%.

They also expect the fiscal year ending March 31 to clock a modest surplus instead of the original shortfall of S$0.4 billion, or 0.1% of GDP, due to buoyant tax revenues

Inflation in Singapore has fallen from its peak of 5.5% early last year but remains higher than pre-pandemic levels at 3.3% in December.

Its economic growth plunged from 3.6% in 2022 to 1.2% in 2023. The trade ministry projects growth of 1% to 3% in 2024.

The city-state’s 5.9 million people are also dealing with a 1-percentage point hike in sales tax that started this year, and an upcoming scheduled increase in water tariffs.

OCBC economist Selena Ling expects to see some relief measures continue, such as the vouchers to households that can be used for food and groceries, which debuted during the pandemic.

Economists also expect more cash payouts and utility rebates.

This budget comes ahead of a planned leadership transition, with Prime Minister Lee Hsien Loong saying he will hand over the reins to Wong before November this year.

An election is expected to follow the succession, although Singapore has until 2025 to call for one.

Measures expected around jobs include unemployment benefits for workers who have been laid off and plans to help citizens keep up new skills and new needs as labour markets face disruption from artificial intelligence.

Economists are also seeking more details on the implementation of pillar 2 of BEPS 2.0, an OECD project under which more than 140 countries have agreed to bring the minimum effective tax rate of large corporates to 15%.

Wong said last year he intends to implement pillar 2 from 2025 but he would monitor the “fluid” international developments and adjust the timeline accordingly.

In Singapore, the current headline rate is 17%, but some investors pay an effective rate that is as low as 4%. Wong last year said BEPS 2.0 would give Singapore “less scope to use tax incentives to attract new investments.”–REUTERS

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