Is Singapore headed towards a dreaded fiscal deficit?

Government spending is expected to increase in 2016.

While the city-state is targeting a budget surplus of 0.8% of GDP for 2016 against a deficit of 1.2% for 2015, qualms about a fiscal deficit is rising due to increased government spending.

However, according to ratings firm Fitch, this will be more than offset by a higher contribution from investment income.

“Fiscal discipline remains underpinned by a constitutional mandate that requires the government to run a balanced fiscal position, on average, during its term,” the report noted.

Meanwhile, gross general government debt was also estimated by Fitch to be 42.2% of GDP at end-2015.

“Debt is not for fiscal funding purposes but to develop the local bond market. The sovereign has no foreign-currency debt,” the report added.