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Budget 2016: What you need to know right now
It will be delivered on March 24.
Budget 2016 will be released in a few hours, and this is what analysts have to say:
Selena Ling, economist at OCBC:
Following the big-ticket items like the Pioneer Generation Scheme (PGS) in recent Budgets, there may not be any blockbuster goodies in this coming Budget. That said, there is still likely to be continued government focus on strengthening social safety nets, especially for the vulnerable groups like the youth in the disadvantaged/low-income households (particularly in the areas of leveling up such as education and housing) and the elderly (beyond the PGS to potentially beefing up of the Silver Support scheme and the livelihood means, whether through the likes of GST vouchers and/or MediSave top-ups). Given sustained high cost of living concerns with Singapore ranked as the most expensive city globally, a further enhancement of Workfare Income Supplement may be on the cards given the last enhancement was in 2013. In particular, the government could further incentivize the employment of elderly Singaporean workers given the demographic ageing. Other sweeteners could also be more targeted tax relief to support healthcare and childcare costs to promote child-bearing and strengthen family bonds.
Francis Tan, economist at UOB:
With the protracted slowdown in global economic conditions affecting an export-dependent economy such as Singapore, and the failure to push productivity higher, we expect the new term of government to concentrate firepower on addressing the immediate and medium term needs of the economy. As an immediate relief for the private sector, particularly for SMEs, we think that the government could lower foreign workers’ levies. For FY 2015, we estimate an overall budget deficit of S$0.69bn (0.2% of GDP). This compares with the much larger deficit of S$6.9bn (1.7% of GDP) initially expected by the government during last year’s Budget. For FY 2016, we estimate an overall budget surplus of S$1.43bn (0.34% of GDP).
Joseph Incalcaterra, economist at HSBC:
Given the soft growth outlook for 2016 and expectations for relatively hawkish monetary policy, there are hopes for a pro-growth budget. Indeed, new FM Heng said as much in recent comments, but also conditioned that the budget will be “particularly prudent” since it will be the first budget released by the government this term. Although new Finance Minister Heng Swee Keat suggested a cautious budget, changes to accounting provisions (i.e. including Temasek in the Net Investment Return framework) will allow as much as SGD4.2bn of additional spending space, and cuts to non-essential spending (i.e. endowment top-ups) could also make room. This should help fund some counter-cyclical measures, in addition to a rise in development expenditure (the government plans for a further 50% increase by 2020, off a high base), while keeping the overall budget position roughly neutral.
Irvin Seah, economist at DBS:
The emphasis will be on helping companies tackle immediate cost concerns and a difficult business climate, as well as helping workers maintain their employability against the backdrop of a softening labour market. This will be a marked deviation from previous years’ budgets, which focused mainly on addressing medium-term restructuring and social issues.
Alleviating cost concerns is one way to help companies through the rough patch. Business costs have continued to rise despite the negative headline consumer price index (CPI) inflation. Specifically, higher wage costs as well as government fees and charges have been the two key drivers of business costs. Some form of moderation in these aspects will be helpful to companies. In addition, the gloomier outlook could imply higher business risks ahead. In event of a recession, the risk premium will rise and liquidity conditions may tighten. And while non-performing loans (NPLs) may not be a major concern at this juncture, they may become an issue amid an economic slowdown.
Even though a recession may not be the base case for now, deepening existing risk-sharing initiatives will help “safeguard” against potential liquidity risks. Beyond near-term concerns, there will be emphasis on helping companies enhance their top-line growth in order to improve productivity. That essentially entails helping local companies improve their revenues. Expect more measures that facilitate value creation and the internationalisation of local enterprises.
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