The 2019 budget is expected to cover several familiar policy priorities. Infrastructure spending, more health-care support for the ageing population and help for employers looking to adapt to the digital economy were mentioned by Heng in an interview late last month.
Singapore’s growth slowed from 3.9 per cent in 2017 to 2.3 per cent last year.
Falling demand and US-China trade tensions saw the Lion City’s export-orientated economy grow at a slower pace than expected in the fourth quarter of 2018.
Economists predict that Singapore’s budget deficit by April will be up to US$5.08 billion or 0.3-1.5 per cent of its GDP.
However, the budget deficit could be smaller than projected thanks to improved tax collection.
“Expectations for a spending spree are high on past surpluses, a likely election and downside economic risks,” said Mohammad Faiz Nagutha of the Bank of America Merrill Lynch in Singapore. Those expectations should be reined in since the Singaporean economy “is not in a crisis”, he added.
Nagutha predicted a shortfall of 0.6 per cent of GDP in the primary balance, versus the government’s 1.6-per/cent estimate.
Most analysts expect the country to announce a “generous” budget. It is thought spending could increase from current levels of 18 per cent of GDP to over 20 per cent ahead of an election that could be held this year. Prime Minister Lee Hsien Loong is constitutionally obligated to call a general election by April 2021.
Singapore’s electronics industry, the largest contributor to Singapore’s 75.2 per cent of GDP that comes from services, fears a slowdown due to the continuing trade disputes between the US and China. Analysts are optimistic a deal can be reached between Beijing and Washington in the next few months, which would greatly boost the city-state’s economic prospects.
And Bloomberg estimates that today’s non-oil domestic export (Nodx) figures are expected to rise to 6.3 per cent month on month or 1.8 per cent year on year, from falls of 5.7 per cent month on month and 8.5 per cent year on year in December.
“Appetite towards the Singapore dollar will most likely receive a boost if trade figures surprise to the upside,” said FXTM analyst Lukman Otunuga. “However, we still see the currency’s trajectory driven by trade developments and the US dollar’s performance.”
The US-Chinese trade dispute looms over today’s budget. Picture credit: Wikimedia