This is an imporovement from 2017 which is forecast to record a $1.9b surplus, but down on 2016 which recorded a $5.2b surplus.
“The main cause of the deficit was the significant pick-up in health and development expenditure, whilst corporate and personal income tax collection largely stagnated,” RHB said.
Further, RHB reported that taxes are expected to increase this year, which is driven by a rise in public expenditure for healthcare due to the country’s ageing population.
Here’s more from RHB:
Singapore’s ageing demographic is well documented, stemming from the approximately 1m baby boomers born between 1947 and 1964. The central case for justifying a tax increase is the projected increase in public expenditure – particularly healthcare – as the population ages. More pressingly, with immigration controls tightening in tandem with accelerating retirements, the labour force contracted 0.4% in 2017. Moreover, population growth has almost stagnated, while resident growth rate remains at 0.8% YoY, below the government’s 1% target for the seventh consecutive year.
However, if the years of fiscal prudence are indeed intended for a rainy day, there is a sense of “if not now, then when?”. Foreign reserves are at a historic high of USD282bn, and although retirements are set to pick up over the next decade, there is reasonable evidence to suggest that technological advancements would be there to help better mitigate the transitions in the medium term.
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