The upcoming Budget 2023 on Feb 14 - Singapore's first post-pandemic Budget - will bring longer-term challenges into sharper focus. Recent moves like the GST hike will help close the funding gap, but they may not be enough, say Coface economists Bernard Aw and Eve Barre.
The Ministry of Finance said on Wednesday that government spending couldby 2030, with most of the increase driven by healthcare expenditure.
Deputy Prime Minister and Finance Minister Lawrence Wong said at the Institute of Policy Studies Perspectives conference in January that there is a “need to redouble”. Government spending on education, including programmes like SkillsFuture, increased from S$9.9 billion in 2010 to S$12.3 billion in 2019, though as a share of government operating revenue, it shrank from 21.4 per cent to 17.1 per cent.
Since 2015, Singapore reported an annual primary deficit in each year except in 2017 - this means the Government’s operating revenue did not fully meet its total expenditure, without including special transfers such as the Jobs Support Scheme and Care and Support Package cash payout. First, conserving operating revenue for other spending needs by separately financing major, long-term infrastructure projects through bonds under the Significant Infrastructure Government Loan Act . Introduced in 2021, it allows the Government to borrow up to S$90 billion to finance projects, such as new MRT lines, major highways and coastal protection infrastructure, spreading the cost of large development expenditure over multiple years.
For example, making a S$16,000 CPF top-up would reduce income taxes by S$1,120 for an individual earning the median monthly income of S$5,070 . Compare this with S$3,520 for top earners paying the highest marginal rate of 22 per cent. Furthermore, research suggests that the influence of such tax incentives on increasing retirement savings is unclear.
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