Photographer: SeongJoon Cho/Bloomberg

Singapore Takes Targeted Steps in Budget to Help Spur Growth

  • Finance minister defers foreign-worker levies in marine sector
  • Infrastructure spending accelerated, CIT rebates extended

Singapore’s Finance Minister Heng Swee Keat outlined a set of targeted measures in his budget speech to help the struggling offshore and energy services industry and spur construction.

The government will bring forward S$700 million ($493 million) worth of infrastructure spending and defer levies on foreign workers in the marine and process sectors for another year, Heng told lawmakers on Monday. He also extended rebates on corporate income taxes.

“Given the uneven performance across different sectors, we need to go beyond general stimulus,” he said in a prepared speech.

Heng Swee Keat

Photographer: Munshi/Ahmed/Bloomberg

Singapore is having to navigate immediate growth risks -- such as weak consumer demand and the rising backlash against free trade -- alongside longer-term challenges, like a rapidly aging population. The budget seeks to flesh out initiatives outlined by a government-appointed panel two weeks ago aimed at driving growth to 2 percent to 3 percent a year over the next decade.

“This budget gives a bird’s-eye view of the economy,” said Lawrence Loh, an associate professor at the National University of Singapore’s Business School. “It covers all the critical bases, most of them quite expected, outlining the report of the Committee on the Future Economy.”

Conservative Budgets

Facebook Live: Gadfly's Andy Mukherjee and CIMB Private Bank Economist Song Seng Wun discuss Singapore's budget

Singapore’s government is fiscally conservative since it’s mandated by law to run a balanced budget over its term of office. Heng raised the budget surplus in the year ending March to S$5.2 billion compared with a previously estimated S$3.4 billion after spending targets were missed and revenue improved slightly. The surplus will narrow to S$1.9 billion in the year beginning April 1, or 0.4 percent of gross domestic product.

Sembcorp Industries Ltd. gained as much as 1.6 percent on the infrastructure spending plans. Sembcorp’s businesses include utilities as well as water and land development.

Below are some of the highlights of the budget speech:

Tax Measures

  • Cap on corporate income tax rebate raised to S$25,000 from S$20,000 
  • Carbon tax on emission of greenhouse gases to be imposed from 2019
  • Personal income tax rebate of 20 percent of tax payable, capped at S$500

Business Support

  • Foreign-worker levies in the marine and process sectors to be deferred for one more year
  • Re-employment age will be raised to 67 years from 65; wage subsidies to be extended
  • Support for small businesses in implementing digital capabilities
  • S$600 million investment in International Partnership Fund to co-invest with Singapore-based companies wanting to expand globally

Spending Adjustments

  • S$700 million of public sector projects to be brought forward in the next two fiscal years
  • Adding S$500 million to National Research Fund, S$1 billion to National Productivity Fund
  • S$2.4 billion allocated to strategies outlined in the Committee on the Future Economy

Environmental Measures

  • Carbon tax will be implemented on power stations and other large direct emitters, rather than electricity users, from 2019
  • Singapore to levy a diesel tax based on usage to curb emissions
  • Water prices to be increased by 30 percent in two phases from July; prices were last revised in 2000

Consumer Support

  • Housing grants for couples will be raised; first-time applicants buying resale public housing flats will receive grants of as much as S$50,000
  • Residents in public housing will be eligible for vouchers providing relief from higher water prices, of S$40 to S$120
  • One-off cash payment of as much as S$200 for low-income households

— With assistance by Stephanie Phang, Sebastian Tong, and Pooja Thakur Mahrotri

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