With 2017 expenditure forecast to be 1% over budget, now is the time to reduce spending, says UOB.
Keeping to a sustainable fiscal system simply means that we should not spend beyond our means during each term of government. UOB said to maintain such a goal, either expenditure has to be cut, or revenue increased, or both.
According to a report, to set the tone for sustainable budget position, the government had then introduced a permanent 2% downward adjustment to the budget caps of all Ministries and Organs of State from 2017 onwards.
During Budget 2017, the government estimated total expenditure of S$75.1b for 2017, a 5.2% increase over the previous year.
UOB economist Francis Tan said, “This is the slowest annual increase since a similar percentage increase during 2012, and perhaps showing government’s commitment to keeping annual expenditure growth low.”
The bank estimates that actual expenditure for 2017 could instead reach S$75.9b, a 6.3% increase over the previous year, or a 1% point higher than government’s estimates.
“Although 2017 total expenditure could come in by a full 1% higher than initial estimates, it should not be too worrisome. This is because we are expected to spend more, not less, on healthcare and infrastructure,” Tan added.
At the same time, 2017 revenue, as Singapore Business Review previously reported, could be $2b (or 2.9%) higher than initially estimated.
UOB also forecasted that total expenditure for 2018 will increase at a faster pace (+11.2%) than operating revenue (+7.1%).
“With that, we expect Budget 2018 to come up with measures to improve revenue,” Tan added.
During Budget 2017, Minister Heng revealed that “we need to strengthen our revenue base in a pro-growth and progressive manner.” As such, there had been much speculation on which revenue segment the government could utilize to improve its revenue.
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