Written by Thomson Reuters
Monday, 22 February 2010 19:37
The government halted income and property tax rebates introduced last year and said it will phase out subsidies paid to employers to hold onto staff amid a strengthening labour market.
But the government will raise spending to boost productivity, which lags developed economies such as the United States, Japan and Hong Kong.
“The economy is improving here and around the world and so is the business activity,” said David Cohen, an economist at Action Economics. “Maybe the government feels it’s time to tighten up their fiscal largess as the economy can afford it.”
Finance Minister Tharman Shanmugaratnam expects a basic budget deficit of $7.2 billion, or 2.6% of GDP, for the fiscal year beginning April 2010, down from an estimated S$8.5 billion, or 3.3% of GDP, this fiscal year.
The overall budget balance for FY2010/11 is an estimated deficit of $3 billion, or 1.1% of GDP.
The basic budget deficit excludes transfers by government to various endowment and retirement funds as well as the net investment returns from the country’s massive reserves.
Singapore last year tapped its reserves for the first time and introduced a $20.5 billion “resilience package” on top of its regular budget to save jobs and help businesses.
The government originally expected a $14.9 billion basic budget deficit in 2009/10 but the shortfall turned out to be smaller as the economy recovered in the second half of 2009 and the boom in the residential market boosted stamp duties.
India, which will announce its 2010/11 budget on Friday, is likely to announce a narrower deficit of 5.5% of GDP, Citigroup predicts. Hong Kong, which will unveil its budget on Wednesday, may dole out income and property tax waivers given the government’s strong finances.