In Focus
ECONOMY | Marianne Estioco, Singapore

Here’s why analysts don’t have high expectations for Singapore’s upcoming budget

It won’t be as generous as the Jubilee Budget.

When Singapore’s 2016 budget is released on March 24, analysts are not expecting to see the massive disbursements and incentives for households that were a key feature of last year’s Jubilee Budget. Instead, the upcoming budget is expected to deliver policy tweaks to help businesses cope with slowing economic growth.

Bank of America Merrill Lynch economist Hak Bin Chua noted that new Finance Minister Heng Swee Keat has inherited a sluggish economy, a manufacturing sector in recession and a weak job market.

And while Heng may wish to be generous to boost growth, the new government faces fiscal constraints in the first year. The government cannot draw upon the accumulated fiscal surpluses of the previous term, limiting the room for an expansionary policy.

“We do not have high expectations for Budget 2016 to have a material impact on growth or markets,” Chua said.

Kit Wei Zheng, ‎Vice President, Economics and Markets Analysis at Citigroup, noted that the upcoming budget will balance between counter-cyclical stimulus, long term productivity goals and fiscal prudence.

“Historically, the fiscal response to recession has been to lower domestic costs, thus engineering a REER depreciation. Although wage subsidies would achieve this objective and save jobs, it could encourage labour hoarding and erode productivity. Moreover, with this being the first year of the new government’s term, the Balanced Budget rule may constrain the size of any fiscal policy response,” Zheng said.

Patrick Ho, Head APAC Thematic Coordination at UBS, said that the Budget will aim to help Singapore deal with a new era of slower growth.

“We see room for potential policy tweaks in 2016 that could support business returns and growth, including reforms to the land transport sector, some moderate easing of property cooling measures, and less stringent foreign worker policies,” Ho said.

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