Singapore Budget 2023: Balancing near and long-term priorities

Amid the economic backdrop of slow growth and high inflation, Budget 2023 aims to strike the balance between addressing near-term needs and long-term priorities.
Group Research, Irvin Seah, Chua Han Teng15 Feb 2023
  • Measures were introduced to help household tackle rising costs
  • Additional efforts were made to support families, home ownership, and vulnerable groups
  • Significant emphasis was placed to encourage innovation and internationalisation
  • Further adjustments in tax policies were put forth to ensure tax progressivity
  • A budget deficit of about SGD 0.4bn (0.1% of GDP) was allocated for FY23
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Below is a summary; For full report with charts and tables, please download the PDF

Budget 2023

Budget 2023 is a multi-facet package that aims to secure the future of Singapore while attempting to address many of the near-term concerns. New initiatives and enhancements were announced to help Singaporeans cope directly with immediate cost pressure. Concomitantly, the budget also focuses on long-term issues such as enhancing the competitiveness and growth of local companies, supporting family planning, strengthening the social safety net to ensure equality and income mobility, as well as coping with the challenges of aging.

On tackling inflation, enhancements were made to the GST Voucher (GSTV) and Assurance Package (AP) (raised to SGD 9.6bn) to help Singaporeans better cope with the high cost of living and the impact of the GST hike. Significant emphasis has also been placed on housing, family support and mitigating the challenges of aging. Housing constraints, be it in terms of supply or cost, is a major hindrance towards family planning. An additional Build-To-Order (BTO) flat ballot will be given to families with children and young married couples who are buying their first home to increase their chance of owning their first home. There will also be additional housing grant (up to SGD 30,000 more) for first timer families to alleviate their concern pertaining affordability.

Moreover, high inflation will exacerbate Singapore’s rapidly falling total fertility rate (currently at only 1.12) by raising overall financial burden of households, as well as potentially upend the retirement plans of elderly. In these regards, the Baby Bonus Cash Gift (up by SGD 3,000), Child Development Account (CDA), and Comcare Endowment Fund have been enhanced to buffer the cost of raising a family, while additional top-ups were made to the Eldercare Fund and Medifund to support eldercare. Indeed, the slew of measures in these areas are certainly welcoming for young couples, and families with young children and the elderly.

Driving enterprise development vs rising CPF costs

The budget also caters for businesses to stay relevant and innovate to capture new opportunities. Measures such as the top-up to the National Productivity Fund (SGD 4bn), the new Enterprise Innovation Scheme, as well as the SGD1bn boost to the Singapore Global Enterprises initiative will go a long way towards raising productivity and innovation and spurring greater internationalisation efforts.

Changes to the Buyers Stamp Duties may impact the high-end property market segment. Increases to the CPF salary ceiling and changes to contribution rates for senior workers would also add on to the manpower costs for companies. That said, the progressive four-year rise for the ceiling increase would allow for a gradual adjustment, while the transition offset for senior workers would somewhat alleviate the rise in business cost.

FY2023 fiscal deficit, but balanced budget achievable in current term

While FY2022 has surprised on the downside with a deficit of SGD 2.0bn (0.3% of nominal GDP), the actual overall position of FY2021 has come in significantly better than the previous estimate of SGD 5.0bn shortfall (0.9% of GDP). Even with the budgeted deficit of SGD 0.4bn for FY23, the accumulated deficit for the current term of government stands at SGD 0.5bn. This is expected to be easily overcome considering that Singapore’s average annual fiscal balance prior to COVID is about SGD 3.3bn. Barring any unforeseen risk, there shouldn’t be any issue for the government to achieve an overall balanced budget in the current term. Moreover, additional impetus will also come from the revenues from the GST hikes, changes to property related measures, personal income tax, wealth and sin taxes announced in recent budgets.

Budget 2023 would also mark a move in the post-pandemic era, where the government will no longer need to draw on the past reserves [3]. This reflects Singapore’s long-held prudent approach towards its fiscal finances and reserves. As Deputy Prime Minister and Finance Minister Lawrence Wong said in his Budget 2023 speech, Singapore’s reserves are the country’s greatest insurance, and would provide the country with the resources to rebuild Singapore, if the island state were to be hit by a bigger calamity or disaster. Henceforth, preserving the reserves would be fundamental to the aim of ensuring fiscal sustainability, economic resilience and ultimately, the long-term relevance of this nation.

To read the full report, click here to Download the PDF.

Irvin Seah

Senior Economist - Singapore

Chua Han Teng, CFA

Economist - Asean

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