Singapore 2022 budget deficit set to be lower than expected; inflationary pressures persist

SINGAPORE — Singapore says its budget deficit for 2022 will be lower than expected — at $1.5 billion dollars, or 0.3% of its gross domestic product.

In his budget speech to Parliament on Tuesday, Finance Minister Lawrence Wong said: “We expect a slight deficit of $2 billion Singapore dollars ($1.5 billion) or 0.3% of GDP for FY2022.” The country previously estimated the 2022 deficit would come in at S$3 billion.

Wong, who is also deputy prime minister, attributed it to higher-than-expected revenue last year.

He expects the deficit for 2023 to narrow slightly to S$0.4 billion — or 0.1% of GDP, and said the country will not be drawing on past reserves this year.

“We now expect to draw a lower amount of up to S$3.1 billion from past reserves. This brings the total expected draw on past results from FY 2020 to FY 2022 to $$40 billion.” That’s lower than the initial S$52 billion the government had sought approval for.

“It reflects our prudent approach in using our reserves — drawing on them judiciously only when there are compelling reasons to do so,” he said.

Singapore hopes to lower the budget deficit for 2023 through tax revenues.

It will be implementing a global minimum effective tax rate of 15% for large multinational companies, as well as increasing taxes for higher-value residential and non-residential properties.

Wong acknowledged that 2022 was a “year of brutal inflation worldwide” and rising costs pressures continue to weigh on the Singapore economy, which grew 3.6% last year.

“By the end of last year, global inflation was around 9% inflation reached historic levels and many advanced economies,” he said.

“Singapore too had to contend with these inflationary pressures — [the Monetary Authority of Singapore] has tightened our monetary policy five times since October 2021,” he added.

Singapore’s core inflation rose to 5.1% in October, and stayed unchanged until December.

He said Singaporeans must “brace ourselves for a period of relatively higher inflation both globally and also in Singapore.”

“There are some early signs that global headline inflation rates are softening, but it is premature to declare victory. We expect headline inflation to remain high at least for the first half of this year,” said Wong.

For example, households can expect up to S$700 in GST vouchers this year, up from the current S$500.

GST will be raised by another percentage point to 9% next year, a move that’s expected to increase inflation further.

Households can also expect up to S$850 in GST vouchers in 2024 to help them cope with the GST hike.

“We will help businesses weather the immediate challenges of tighter financial conditions and higher energy prices,” he said. Measures include extending current enhancements to the enterprise financing scheme and energy efficiency grant until 31st March 2024, as well as working capital loans for local construction projects via project loans.

“I hope this will also encourage financial institutions to continue extending credit to viable enterprises.”

This is a developing story. Please check back for updates.