MINDSET OF FISCAL PRUDENCE
Going forward, it is still important to explore other revenue sources to ensure Singapore adheres to a mindset of fiscal prudence.
Singapore has managed the situation admirably by running a deficit during the COVID-19 pandemic years, similar to many other global economies.
In the financial year ahead, the Government expects to spend S$104.2 billion, which works out to 2.6 per cent less than the S$107 billion spent in the revised 2022 figure.
Operating revenue for FY2023 is projected to be S$96.7 billion, which is 7.1 per cent more than the previous year’s revised S$90.3 billion of takings.
Overall, the Government is expecting a slight deficit of S$0.4 billion in FY2023, or 0.1 per cent of Singapore’s GDP. This is a decrease from 2022’s deficit of S$2 billion, or 0.3 per cent of the GDP.
Unlike the last three years when the Government had to draw on past reserves to cope with the unexpected shocks and disruptions from COVID-19, it will not be doing so this year as things return to normal.
The total expected draw on past reserves from FY2020 to FY2022 is expected to be S$40 billion, lower than the initial S$52 billion that the Government had sought the President’s approval for.
Mr Wong is his Budget speech said that this reflects the Government’s prudent approach in the use of reserves.
Budget marksmanship traditionally works in more normal economic cycles. An unexpected pandemic is difficult to predict or assess the magnitude of the resources needed, so it is even more challenging to assess if the budget marksmanship is up to par. The role of the policymakers may be “kiasu” but the need to repeatedly go back to the President for approval to draw on past reserves may have contributed to putting in an initially larger estimate.
When Singapore last drew on its reserves during the global financial crisis in 2008, it spent S$4 billion in FY2009 and was able to put back what it drew two years later due to the sharp recovery in the economy and in its fiscal position.
This time, however, it is “highly unlikely” that Singapore will be able to put back what it has drawn from past reserves because it “continues to be in a tight fiscal position”, said Mr Wong.