ECONOMY | Staff Reporter, Singapore

Here's what experts have to say about Budget 2016

The economy is in the spotlight.

Previous budgets have featured generous incentives for both individuals and businesses, but analysts reckon that this year's budget statement will focus on ensuring domestic growth and stability amidst an increasingly volatile global macroeconomic backdrop.

Selena Ling, economist at OCBC:

Following the big-ticket items like the Pioneer Generation Scheme (PGS) in recent Budgets, there may not be any blockbuster goodies in this coming Budget. That said, there is still likely to be continued government focus on strengthening social safety nets, especially for the vulnerable groups like the youth in the disadvantaged/low-income households (particularly in the areas of leveling up such as education and housing) and the elderly (beyond the PGS to potentially beefing up of the Silver Support scheme and the livelihood means, whether through the likes of GST vouchers and/or MediSave top-ups). Given sustained high cost of living concerns with Singapore ranked as the most expensive city globally, a further enhancement of Workfare Income Supplement may be on the cards given the last enhancement was in 2013. In particular, the government could further incentivize the employment of elderly Singaporean workers given the demographic ageing. Other sweeteners could also be more targeted tax relief to support healthcare and childcare costs to promote child-bearing and strengthen family bonds.

Francis Tan, economist at UOB:

With the protracted slowdown in global economic conditions affecting an export-dependent economy such as Singapore, and the failure to push productivity higher, we expect the new term of government to concentrate firepower on addressing the immediate and medium term needs of the economy. As an immediate relief for the private sector, particularly for SMEs, we think that the government could lower foreign workers’ levies. For FY 2015, we estimate an overall budget deficit of S$0.69bn (0.2% of GDP). This compares with the much larger deficit of S$6.9bn (1.7% of GDP) initially expected by the government during last year’s Budget. For FY 2016, we estimate an overall budget surplus of S$1.43bn (0.34% of GDP).

Joseph Incalcaterra, economist at HSBC:

Given the soft growth outlook for 2016 and expectations for relatively hawkish monetary policy, there are hopes for a pro-growth budget. Indeed, new FM Heng said as much in recent comments, but also conditioned that the budget will be “particularly prudent” since it will be the first budget released by the government this term. Although new Finance Minister Heng Swee Keat suggested a cautious budget, changes to accounting provisions (i.e. including Temasek in the Net Investment Return framework) will allow as much as SGD4.2bn of additional spending space, and cuts to non-essential spending (i.e. endowment top-ups) could also make room. This should help fund some counter-cyclical measures, in addition to a rise in development expenditure (the government plans for a further 50% increase by 2020, off a high base), while keeping the overall budget position roughly neutral.

Irvin Seah, economist at DBS:

The emphasis will be on helping companies tackle immediate cost concerns and a difficult business climate, as well as helping workers maintain their employability against the backdrop of a softening labour market. This will be a marked deviation from previous years’ budgets, which focused mainly on addressing medium-term restructuring and social issues.

Alleviating cost concerns is one way to help companies through the rough patch. Business costs have continued to rise despite the negative headline consumer price index (CPI) inflation. Specifically, higher wage costs as well as government fees and charges have been the two key drivers of business costs. Some form of moderation in these aspects will be helpful to companies. In addition, the gloomier outlook could imply higher business risks ahead. In event of a recession, the risk premium will rise and liquidity conditions may tighten. And while non-performing loans (NPLs) may not be a major concern at this juncture, they may become an issue amid an economic slowdown.

Even though a recession may not be the base case for now, deepening existing risk-sharing initiatives will help “safeguard” against potential liquidity risks. Beyond near-term concerns, there will be emphasis on helping companies enhance their top-line growth in order to improve productivity. That essentially entails helping local companies improve their revenues. Expect more measures that facilitate value creation and the internationalisation of local enterprises.

Ajay Kumar Sanganeria, Tax Partner, KPMG Singapore:

The new term of Government is expected to exhibit practicality and prudence. In the face of a weaker economy, I expect that Budget 2016 will focus on the shift from a value-adding to a value-creating economy in order to develop a strong core of Singaporean businesses to compete globally at the higher end of the value chain. In a small economy like Singapore, enhancing productivity will inevitably be hampered by the limited indigenous workforce. The only way for businesses to survive and thrive is to continually create new value through new products and services, new markets or new business models.

Therefore, the focus of this year’s Budget is thus likely to be on longer term business sustainability with a more balanced shift of initiatives from value adding to value creation to enhance Singapore enterprises’ domestic and international resilience and competitiveness. Together with the establishment of the ASEAN Economic Community and Trans-Pacific Partnership, this provides a unique opportunity for Singapore to enhance its global competitiveness.

All in all, I think Budget 2016 should provide an indication of Singapore’s economic priorities and mid and long-term strategies to address both domestic and international business concerns.

Lee Tiong Heng, Tax Partner, Deloitte Singapore:

I expect Budget 2016 to build on key themes of boosting productivity, encouraging innovation and providing assistance to businesses to capture middle and long term growth opportunities while also helping businesses to manage immediate challenges of a potentially slower local economy.

In recent years, the focus of the Singapore Government is to achieve growth via creating value, instead of merely adding value. Whilst boosting productivity is important and remains a challenge for certain sectors of the economy, I expect encouraging innovation and the creation of a thriving environment for entrepreneurship to be the focus of Budget 2016 and future Budgets. I also expect the government to set aside budget to continue helping the less fortunate but perhaps not to the same extent as before.

Chia Seng Chye, Partner - Tax Services, Ernst & Young Solutions LLP

Budget 2016 might not see a sea change in terms of policy changes, but rather, there might be enhancements and tweaks for short-term fixes with a view to set Singapore up nicely for the longer term. SG50 may have come and gone but instead of writing the campaign off, the Government should all the more tap on what the Jubilee year had amassed and ride on the success of much emotional goodwill and economic dividends generated.

Anuj Kagalwala, Asset & Wealth Management Tax Leader, PwC Singapore

In my view, this year’s budget will continue on the journey that has been laid out in the Jubilee Budget. Though, unlike last year, Budget 2016 is likely to have less direct payouts.

Whilst the Government should continue to focus on SMEs and startups, we think it may be appropriate to enhance its focus on the larger corporations and the financial services sector. The focus for the latter has been diluted in recent years. Two areas that are worth a mention are loss carry back provisions and capital gains safe harbour.  


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