This economics summary of Singapore's Budget 2017 is contributed by a former economics lecturer
What Happened? A Brief
Summary of Budget 2017
In his 90-minute speech
to Parliament on Monday, 20 February 2017, Singapore’s Minister for Finance,
Mr. Heng Swee Keat, focused on future economic challenges facing Singapore.
With economic growth surpassing
some economists’ expectations last year in 2016, Singapore's Budget 2017 looks to
the future by earmarking S$2.4 billion to roll out multi-year economic schemes.
These economic programmes are in addition to the industry-level transformation
initiatives, totalling S$4.5 billion, rolled out in 2016’s budget.
But at a time of slowing economic
growth in recent years, some S$1.4 billion is also set aside to help firms and
workers, and provide additional economic support for individuals, households,
and the disadvantaged, to help promote an inclusive society in Singapore. Even
with economic support measures, the Singapore government still – nevertheless –
wants to continue promoting a sense of self-reliance in companies, workers, and
families, and encourage partnerships to drive the Singapore economy forward.
Some Economic Figures –
Economic Stimulus
Broad economic stimulus measures
were avoided, and instead the government aimed for targeted economic measures
in 2017. As Minister Heng commented, "Budget 2017 is an investment in our
economic transformation and social resilience." This is an important
point. Budget 2017 is expansionary, with total expenditure coming to S$75.07
billion, some S$3.68 billion more than for FY2016.
The Singapore budget
surplus, lifted by S$14.11 billion in net investment returns, is expected to be
at S$1.91 billion, or 0.4 per cent of Gross Domestic Product (GDP). This is
S$3.27 billion smaller than the FY2016 surplus. Nonetheless, Minister Heng
reassured the House that "this budget position is prudent, while
supporting firms and households in the midst of continued economic
restructuring."
Singapore is Undergoing a
Key Transition as Our Economy Matures
Budget 2017 comes at a
time when Singapore is undergoing a "key transition" as the economy
matures. Singapore’s open and trade-dependent economy reported 2 per cent
growth for 2016, one of the slowest years since the 2008 global financial
crisis. Structural economic shifts towards economic productivity are also
weighing on companies and the labour market.
And the International
Context is Changing and Evolving
At the same time, deep economic
shifts and economic uncertainties are happening rapidly and globally for trade
and investments, businesses and jobs. In fact, Minister Heng commented that at
the last Budget, issues like Brexit seemed remote and the US had just started
the process of electing their new President. He further said that events since
then were a stark reminder of how quick and unpredictable change could be.
Expand Overseas - Go, Go, Go
Minister Heng unveiled a
S$2.4 billion response, spread over four years, to execute the Committee of the
Future Economy (CFE) recommendations. The report laid out economic strategies
to help Singapore remain relevant amid a fast-changing world. Rejecting the inward-looking
economic mood of some advanced economies, Mr Heng said that a key thrust is to
help Singaporeans and companies tap overseas economic opportunities. In that
vein, a S$600 million fund will be set up to support firms expanding overseas.
Called the International Partnership Fund, it will co-invest with
Singapore-based firms to help them scale up and internationalise.
Digital Economy – and Digital
Economies
There will be economic help
for small and medium enterprises to gain digital technological capabilities,
and to use them effectively. Plans were also drawn up for research agencies like
A*Star in Singapore to help companies tap innovation or co-develop intellectual
property so that companies can grow.
But Singapore Will Support Firms and Workers
in the Short Run
However, in a nod to the
slow economic growth environment, Budget 2017 also responded to the near-term economic
concerns of firms and workers. To tackle cyclical concerns, foreign worker levy
increases for the marine and process sectors will be deferred by one more year,
while S$700 million worth of public-sector infrastructure projects will be
brought forward to support the construction sector. In addition, there will be
enhanced corporate income tax rebates, while eligible businesses, especially
smaller ones, will receive help in coping with higher wage costs. Some S$26
million per year will be set aside to help train workers looking to take new
jobs or go for work attachments. Economic measures were also unveiled to
support families, including more public housing grants and a personal income
tax rebate of 20%, capped at $500, which is definitely a welcome measure in
such tough economic times.
Sustainability – Spending Caps,
Taxes, Carbon Taxes, and Water Taxes
With increasing spending
demands, Budget 2017 put in place measures to ensure fiscal sustainability,
while pointing to longer-term tax policy changes. For example, Minister Heng
said that all ministries and organs of state will lower their budget caps by 2
per cent permanently. And a new carbon tax on emission of greenhouse gases was
proposed, while water prices will be hiked by 30 per cent in two phases to
reflect the increased cost of producing water, and to signal the importance of water
to Singapore’s survival.
And What’s Next?
Singapore’s Parliament
will convene on 28 February 2017 to debate the Budget, and then after the Budget
Debates are concluded, the Committee of Supply 2017 debates will begin.
JC Economics Essays -
Singapore Budget 2017 special. This short summary and opinion piece will help A level economics students understand the issues surrounding budget and the parliamentary process better. Thank you for reading and cheers!
