Check out these five fearless forecasts for Budget 2015

Expect cash handouts and restructuring policy tweaks.

1. Massive rebates and cash handouts

DBS expects that the government will introduce a $13.5b transfer package to alleviate the well-being of less fortunate segments of the society.

The package will be made up of a one-off cash handout and rebates for all Singaporeans, similar to the "Grow and Share" package announced in 2011. It will be used to share the fruits of economic success with Singaporeans amid the nation's 50th birthday.

The bulk of the special transfers is meant for the Silver Support scheme, which will provide basic financial help to the low-income elderly with insufficient CPF savings for retirement and little family support.

DBS estimates that a lump sum of about $10-12b will be set aside for the Silver Support scheme and returns from the investment of the $8b Pioneer Generation Fund will be used to finance it.

2. More help for the sandwich class

UOB expects that Budget 2015 will be used to ease the bite of economic restructuring on Singapore’s sandwich class.

The report stated that this group of Singaporeans had experienced the brunt of Singapore’s economic restructuring without much targeted assistance to their livelihoods and capabilities building. 

Budgets in the past few years had focused on addressing the labour crunch faced by firms as well as patching up the inadequacies in the social safety nets, particularly for the older and less well-to-do Singaporeans.
UOB expects a significant portion of the Budget earmarked to provide opportunities for Singaporean workers to upgrade themselves. 

“Singapore is not a low-cost country and the value created by our workers has to justify the price that we are selling to the world. No amount of money poured into investing in better machines and capital goods will be justified if workers are not upgraded/trained to work alongside such technologies,” UOB noted.

3. Big fiscal deficit

Analysts also expect the government to post a fiscal deficit in this year’s budget in order to support the massive transfer package and to boost Singapore’s sluggish productivity growth.

Nomura expects policymakers to declare a fiscal deficit of 0.3% of the GDP to give Singapore’s productivity a much-needed boost, while DBS believes that the government will post a $1.3 billion fiscal deficit. 

According to Nomura, productivity growth is increasingly becoming the main driver of GDP growth because of the tight labor market. The pressure to see more visible results from the productivity drive is therefore rising, and Budget 2015 is expected to carry a fiscal deficit of 0.3% of GDP to support the restructuring agenda of boosting productivity.

4. Tweaks in restructuring policies

DBS expects that the government will use Budget 2015 to tweak some restructuring policies and make the measures more targeted and less painful.

DBS notes that specific measures to help certain industries raise productivity may be on the cards, as productivity growth continues to languish halfway through the ten-year restructuring process.

This sentiment is seconded by OCBC, which states that this lighter touch could be manifested in a “more carrots and less stick” approach to economic restructuring, taking into account the industry feedback. 

Rising business costs and tightening labour market constraints on the supply side remain key bugbears for businesses operating in Singapore. 

“As such, more creative incentives and schemes to help local enterprises, especially SMEs, to venture abroad in search of greater business opportunities and to cope with the restructuring challenges would provide some relief. As a premature unwinding of the foreign manpower curbs is unlikely to be on the cards, the most benign scenario would be a pause in the pace of tightening, whether through foreign worker levies or the DRC,” stated OCBC. 

5. Positioning Singapore for the next 50 years

The Jubilee Budget is expected to set the course for the next 50 years of Singapore’s future. Therefore, analysts expect that positioning Singapore for the future will be an important theme, as policymakers gear themselves for the challenges of the next half-century.

OCBC notes that the key themes of recent budgets, namely inclusive growth which prioritizes socio-economic aspirations will also be an extended motif. 

“These socio-economic themes run the gamut from improving the affordability of healthcare and housing, and addressing retirement adequacy, especially for the low to middle-income households, while maintaining the principles of fiscal prudence, and we do not expect the FY15 Budget theme to deviate too far from these. To a certain extent, the FY15 Budget’s elaboration of the Silver Support Scheme, SkillsFuture and CPF Advisory Panel recommendations will not be a total surprise,” noted OCBC.