(Bloomberg) -- Singapore’s Finance Minister Tharman Shanmugaratnam may include more welfare benefits in a budget Monday that's potentially the current administration’s last before an election that has to be held by January 2017.
Gross domestic product growth slowed to 2.9 percent last year from 4.4 percent in 2013, underscoring the government’s challenge of shoring up expansion while boosting social-safety nets to support an aging population and help voters cope with rising prices of services including health care.
The Southeast Asian nation is at the midpoint of a 10-year economic restructuring that includes reducing its reliance on cheap foreign labor and luring new industries such as design and aerospace engineering.
The clampdown on overseas workers has hurt businesses, while productivity gains lag the official target set in 2010.
“We expect the government to continue its drive to increase social spending and also introduce some cash transfers this year, ahead of a potential early general election,” said Michael Wan, a Singapore-based economist at Credit Suisse Group AG.
“While not all these transfers will be handed out by the government immediately, we could see some upside risks” to private consumption, he said.
The budget, for the fiscal year starting April 1, may spell out specifics for the rollout of a universal health care insurance plan, a program for handouts to low-income elderly, changes to the mandatory pension savings system and incentives to encourage companies to boost productivity, analysts said.
The administration is constitutionally required to keep a balanced budget over its term in government. It said last year it would spend S$9 billion ($6.6 billion) on health care and other benefits for the elderly, and gave companies funds to boost efficiency as they adjusted to a tighter labor supply.
The current administration was elected in 2011, when Prime Minister Lee Hsien Loong’s ruling party won with the smallest margin of the popular vote since independence in 1965.It has probably accumulated a fiscal surplus of about S$10 billion since then, estimates Wan.
The following six charts show trends in Singapore’s economy and budget spending that may guide today’s measures:
1. Deficit Risk The government probably had a surplus of S$1.9 billion in the 2014 fiscal year ending March 31, compared with the S$1.2 billion deficit budgeted, said DBS Group Holdings Ltd. economist Irvin Seah.
It may have a deficit of S$1.3 billion for the 2015 fiscal year, he said. This chart shows the budget position has been better than initial projections every fiscal year since at least 2008.
2. Productivity Drive
The government last year extended an incentive plan for firms to boost productivity by a further three years.
The program may be drawn out to 2018 and retain a 50 percent tax deduction on research expenditure by 10 years, Barclays Plc. economists Wai Ho Leong and Bill Diviney wrote in a report. This chart shows Singapore’s annual productivity growth trailing a target of 2 percent to 3 percent over a decade.
3. MediShield Life
The government will provide details on how it plans to pay for a new universal health insurance plan called MediShield Life.
It will spend about S$4 billion in the next five years on subsidies and support for the program that will be implemented at the end of 2015, according to the Ministry of Health. This chart shows the increase in government health-care spending per person since the 2006.
4. Elderly Support
The government may set aside S$10 billion to S$12 billion for a program to provide financial help to low-income elderly, according to DBS’s Seah. This chart shows the proportion of Singaporeans of age 55 years and above has risen as the share of 25-to-54-year olds has shrunk.
5. Birthday Gift
With the nation marking its 50th year of independence in 2015, a S$3.2 billion package of relief measures may be unveiled to cushion poorer households, said Leong and Diviney at Barclays. This chart shows the increase in government transfers per household member since 2009.
6. Property Curbs
Investors are waiting to see if the government will ease the residential property curbs it began introducing in 2009. Home prices in 2014 posted their first annual decline since the global financial crisis. A significant loosening of the measures is unlikely, as officials including Shanmugaratnam regard a further correction in prices as favorable, said Credit Suisse’s Wan.
bloomberg.com
Gross domestic product growth slowed to 2.9 percent last year from 4.4 percent in 2013, underscoring the government’s challenge of shoring up expansion while boosting social-safety nets to support an aging population and help voters cope with rising prices of services including health care.
The Southeast Asian nation is at the midpoint of a 10-year economic restructuring that includes reducing its reliance on cheap foreign labor and luring new industries such as design and aerospace engineering.
The clampdown on overseas workers has hurt businesses, while productivity gains lag the official target set in 2010.
“We expect the government to continue its drive to increase social spending and also introduce some cash transfers this year, ahead of a potential early general election,” said Michael Wan, a Singapore-based economist at Credit Suisse Group AG.
“While not all these transfers will be handed out by the government immediately, we could see some upside risks” to private consumption, he said.
The budget, for the fiscal year starting April 1, may spell out specifics for the rollout of a universal health care insurance plan, a program for handouts to low-income elderly, changes to the mandatory pension savings system and incentives to encourage companies to boost productivity, analysts said.
The administration is constitutionally required to keep a balanced budget over its term in government. It said last year it would spend S$9 billion ($6.6 billion) on health care and other benefits for the elderly, and gave companies funds to boost efficiency as they adjusted to a tighter labor supply.
The current administration was elected in 2011, when Prime Minister Lee Hsien Loong’s ruling party won with the smallest margin of the popular vote since independence in 1965.It has probably accumulated a fiscal surplus of about S$10 billion since then, estimates Wan.
The following six charts show trends in Singapore’s economy and budget spending that may guide today’s measures:
1. Deficit Risk The government probably had a surplus of S$1.9 billion in the 2014 fiscal year ending March 31, compared with the S$1.2 billion deficit budgeted, said DBS Group Holdings Ltd. economist Irvin Seah.
It may have a deficit of S$1.3 billion for the 2015 fiscal year, he said. This chart shows the budget position has been better than initial projections every fiscal year since at least 2008.
2. Productivity Drive
The government last year extended an incentive plan for firms to boost productivity by a further three years.
The program may be drawn out to 2018 and retain a 50 percent tax deduction on research expenditure by 10 years, Barclays Plc. economists Wai Ho Leong and Bill Diviney wrote in a report. This chart shows Singapore’s annual productivity growth trailing a target of 2 percent to 3 percent over a decade.
3. MediShield Life
The government will provide details on how it plans to pay for a new universal health insurance plan called MediShield Life.
It will spend about S$4 billion in the next five years on subsidies and support for the program that will be implemented at the end of 2015, according to the Ministry of Health. This chart shows the increase in government health-care spending per person since the 2006.
4. Elderly Support
The government may set aside S$10 billion to S$12 billion for a program to provide financial help to low-income elderly, according to DBS’s Seah. This chart shows the proportion of Singaporeans of age 55 years and above has risen as the share of 25-to-54-year olds has shrunk.
5. Birthday Gift
With the nation marking its 50th year of independence in 2015, a S$3.2 billion package of relief measures may be unveiled to cushion poorer households, said Leong and Diviney at Barclays. This chart shows the increase in government transfers per household member since 2009.
6. Property Curbs
Investors are waiting to see if the government will ease the residential property curbs it began introducing in 2009. Home prices in 2014 posted their first annual decline since the global financial crisis. A significant loosening of the measures is unlikely, as officials including Shanmugaratnam regard a further correction in prices as favorable, said Credit Suisse’s Wan.
bloomberg.com
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