- Fiscal imperatives are split between near term challenges and medium term structural improvement
- We expect a slightly expansionary fiscal stance in FY2024
- More measures and allowances to tide through high cost, job disruption, and retirement are likely
- Priority will be to lift capabilities by upskilling, riding emerging trends and remaining attractive
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Budget 2024, to be announced on February 16, will focus on adapting to challenges and seizing opportunities to build a better Singapore in a highly uncertain world.
Tougher global backdrop for Singapore
Singapore is facing an increasingly uncertain global environment. Geopolitical tensions, from US-China rivalry to ongoing wars, persist. Interest rates are elevated, amid high albeit easing inflation. Technology disruptions and climate change add to the volatile landscape.
Given lingering global uncertainties, Singapore’s external-led economic growth recovery to our 2.2% forecast in 2024, from 2023’s 1.2% advance estimate, is likely to be fragile. Singapore’s household and business cost pressures remain high. Inflation is likely to be above the pre-pandemic rate in 2024, due to the goods and services tax hike and other scheduled price increases, even as it eventually eases in line with global dynamics.
We expect fiscal policy and Budget 2024 to balance between near and long-term priorities. These include ideas from the Forward Singapore (Forward SG) exercise (see ‘Forward Singapore: A roadmap towards resilience’). In our view, Budget 2024 will be a key part of the 4G leadership’s multi-year Forward SG roadmap execution, with 2024 seen as a year of leadership transition.
Providing assurances on multiple fronts
Singaporeans are facing various pressures, and we expect Budget 2024 to provide greater assurance. Assurance is one of the key elements identified in Forward SG. Pressures include cost-of-living concerns, potential job disruption from technological change, and worries over retirement adequacy.
Focus on a vibrant economy
Sustaining a strong and vibrant economy remains key to a brighter future for Singapore. Growing the economy is flagged out in Forward SG, and will likely be a priority in Budget 2024. We expect the focus to be on developing talent, raising productivity and capabilities by riding emerging trends in technology and sustainability, and ultimately maintaining its attractiveness as an investment destination.
Room for slight expansionary FY2024 budget
We see room for a slight expansionary budget for FY2024, and expect an overall fiscal deficit of SGD3.0bn (0.4% of GDP). Positive surprises in fiscal performance in the earlier years of the current government’s five-year term provide some near-term fiscal flexibility.
Better budget outcomes create some space to tackle an increasingly uncertain world. This could be in terms of near-term support, such as the SGD1.1bn Cost-of-Living Support Package in end-September 2023, or forthcoming assistance in the upcoming budget. Importantly, current fiscal resources can be set aside and committed for some of the long-term plans in the execution of the Forward SG roadmap to chart a better future for Singapore. Taking a strategic and long-term approach to allocate finite fiscal finances would be in line with Singapore’s long-held principle of fiscal responsibility and prudence.
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