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25 June 2024

Singapore announces budget in a bid to offset rising prices

By Agencies


Singapore unveiled a national budget on Friday that offered income tax rebates and cash handouts to citizens in a bid to alleviate the burden of rising costs amid uncertainty in the global economy.


Finance Minister Tharman Shanmugaratnam told Parliament the government expects to post a surplus of SGD6.4 billion (Dh16.6bn) for the fiscal year through March, compared to a projected deficit of SGD0.7bn (Dh1.8bn ) at the start of the year.


He attributed the surplus to faster than expected economic growth of 7.7 per cent last year and an “exceptionally buoyant” real estate market.


Tharman said the government’s economic fundamentals remained strong and that it expects the economy to expand four to six per cent this year, but warned a severe slowdown in the US economy posed a major risk to the growth of the export-dependent city-state.


Tharman said the government expected to post a budget deficit of SGD800 million (Dh2.08bn) in the upcoming fiscal year ending March 31 2009.


“A sharper than expected decline in the US economy could add to the turmoil in financial markets and deepen the credit crunch that is still unfolding,” Tharman said. “This would inevitably spill over to the Asian economies and markets, and our own growth will be impacted.”


Tharman said the government is also concerned about the rising cost of living.


“Inflation today is higher than what we have been used to in Singapore for many years,” he said, noting that prices of essential items such as cooking oil, bread, milk and other dairy products have gone up significantly over the past year.


To help cushion the impact of rising consumer prices, the government is offering a SGD1.8bn surplus-sharing package that includes SGD865m in cash handouts, Tharman said.


He said the package focuses particularly on lower and middle income groups and older Singaporeans.


“Their needs are greater, and they are more affected than better-off Singaporeans in the current climate of rising prices,” Tharman said, adding the cash would be distributed to citizens in April and October this year.


He said the majority of Singaporeans will receive SGD300, while poorer citizens will get SGD400 in handouts.


Singapore’s consumer prices, which rose at their fastest rate in 25 years in December, are projected to rise 4.5 to 5.5 per cent this year.


The government is also giving a 20 per cent income tax rebate of up to SGD2,000 per resident in 2008, which is expected to cost about SGD380m, he said.


Tharman added that while Singapore will not lower its personal income or corporate taxes this year, it may reduce the levies in the future to remain competitive.


Other measures introduced include increased investments in education and continued learning and tax incentives to promote research and development, as well as an additional SGD800m to a national research fund.


Noting that a shortage in office rental space was leading to increased costs for businesses, the government plans to relocate several government agencies out of the central district to free up space for use by the private sector, Tharman said. It would also defer SGD1bn in public sector construction projects, he said.


Tharman added that the government is removing estate duty, defined as a tax on the total market value of a person’s assets upon their death, in a bid to enhance the city-state’s attractiveness as a regional hub for wealth management.


“If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth,” he said. (AP)