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Budget 2023 to adopt five-pronged approach: analyst

RHB said the budget will focus on developing SG's competitiveness and strengthening social safety nets.

The government will likely address five areas of concern in the 2023 budget to ultimately achieve its goal of developing Singapore's competitiveness and strengthening its social safety nets, RHB said. 

In a report, RHB said the budget will focus on helping Singapore stay relevant and viable in tomorrow's world, helping the vulnerable and lower-income, supporting businesses, developing a skilled workforce, and developing a sustainable and green Singapore.

For Singapore to stay economically relevant and viable, RHB said the nation must invest in new capabilities and strengthen its digital capabilities.

"With pandemic-related risks likely a thing of the past, we think the focus will be on building Singapore’s medium- to long-term priorities in technology, innovation and enterprise...We expect policymakers to earmark monies to invest in Singapore’s broadband infrastructure, especially for future technologies such as 6G," RHB said,

"Moreover, the emphasis will be on R&D efforts to develop digital capabilities for the private sector and earmark funds to support SMEs’ adoption of digital and automation solutions. On this note, Singapore’s efforts to build its economic relevancy have led to sustained FDI inflows compared to the rest of Asia," it added.

To provide more support for vulnerable and lower-income groups, RHB said the government should make enhancements to the current Workfare Income Supplement (WIS), by tweaking the minimum wage of at least S$500/month and/or maximum income cap of S$2,500/month. 

"Supplementing wages is also paramount, given that average inflation of 7.3% as of 3Q22 has surpassed wage growth of 7.1% over the same period. In addition, wage support may be introduced in response to the rise in hybrid work arrangements, as employees who adopted such work arrangements may see some form of 'work from home' relief in recognition that the burden of costs has shifted away from employers to employees.

"Separately, we do not discount the introduction of unemployment support for retrenched workers in FY2023. However, this should include specified prerequisites such as a minimum period of full-time work before retrenchment, property ownership below a specific annual value and showing efforts to seek re-employment after retrenchment. Elsewhere, we think there is a need to help workers especially aged 50 and above, assuming that this group likely has lower education qualifications and may struggle to increase their income or change careers," RHB said.

The budget will likely be geared towards  supporting SMEs, said RHB, given that  small- to medium enterprises (SMEs) account for 99% of all enterprises and employ 72% of Singapore’s workforce.

"We think some form of business support to help the specific industries may be on the cards...We think that Singapore’s growth will be uneven across its industries; we see further downside risks for Singapore’s externally-facing industries such as exports and manufacturing, especially from its electronic (semiconductor-related) and chemicals clusters (petrochemicals)," RHB said

"We think that the softness seen in global technology-related companies may persist in 1H23, considering the ongoing layoffs in international tech firms. Other supports for businesses may also include introducing aid for SMEs in defraying the added costs of the hybrid working arrangement adopted across most companies, should there be a rise in ‘Work-from-home’ relief for employees in adopting such work arrangements. Elsewhere, tax incentives may also be introduced for industries in need of foreign talents, such as in the biomedical sciences, financial services and digital technology-related sectors, for these industries recruit and retain talent," RHB added.

Whilst Singapore's labour force remains relatively tight, RHB said " the issue of structural unemployment remains on the table as we move into a more digitalised global
"There is a need for Singapore to invest in the lifelong learning of its workforce, especially the midcareer workers, in the skills and capabilities relevant to the evolving business needs. We think some enhancement to the Workfare Skills Support (WSS) scheme will allow more inclusivity amongst low-wage workers and encourage them to undertake training. The enhancement may be from increasing the income cap of the current S$2,300 per month and topping up more training allowance beyond the current stipulated S$6 per hour, given the higher cost of living,"

"We also think a SkillsFuture top-up is due, especially since the last top-up was made in December 2020. We believe that the emphasis on reskilling will likely be concentrated in the green, digital, and healthcare areas, on top of the need for soft skills such as communication, digital fluency, problem-solving and customer orientation. We also expect some support for displaced workers to empower them with the needed skills to stay relevant in tomorrow’s world.The need for more policy support to encourage reskilling to us is crucial at this point, given the recent rise in retrenchment in specific industries," RHb said.

The last area of focus for the budget will likely be on  "enabling a sustainable and green Singapore." 

Beyond carbon taxes, RHB said the government must create policies that encourage corporate investments in green technologies. 

"We expect the policymakers to introduce allowances on capital expenditure incurred respectively to energy efficiency and emissions reduction solutions. Moreover, GST rebates and/or vouchers may also, be considered for individuals and households to purchase certified energies from providers and subsidise purchases
on energy-efficient appliances," RHB said.

"Separately, we think that an extension of the Sustainable Bond Grant Scheme beyond the current validity of 31 May 2023 may materialise. The extension will encourage the issuance of green, social and sustainability bonds, thus helping issuers cover additional costs associated with the green initiative," it added.

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