Singapore’s Prime Minister office has submitted to Singapore Parliament, the Government’s financial policy for the FY 1 April 2024 to 31 March 2025 last week. Singapore’s Deputy Prime Minister Lawrence Wong said that the international environment continues to be challenging and that the city state economy grew a meek 1.1% last year, narrowly avoided recession.

Inflation

For 2024, he said that the outlook is mixed, as Growth in the major economies on the whole is expected
to remain resilient. But geopolitical risks continue to loom large as wars are raging in Europe and the Middle East. These conflicts can escalate dangerously, leading to disruptions in global energy markets and supply chains. He further added that for some time to come, Singapore will have to operate in an external environment that will be less stable and favourable to our security and prosperity than the preceding three decades.

On the other hand, there are some upsides as global inflationary pressures are expected to recede
further which may provide room for major central banks to adopt more accommodative stances such as lowering interest rate, which can help to ease financial conditions and support demand.

The global electronics industry is also expected to recover. This will bolster the growth of many regional economies, including Singapore’s key trading partners. Asia in general continues to be a key driver of global growth, with a wider spread of opportunities across the region not just in China, but also in India and many parts of Southeast Asia.

Besides lower inflation, Singapore is expecting higher GDP growth at 1.0% to 3.0%. Singapore has been enjoying low inflation for more than a decade. But inflation rose sharply in 2022, following the outbreak of the war in Ukraine, which led to significant increases in global energy and food prices. However, last year, even though inflation has started to moderate, economic growth has slowed drastically, leading to lower real incomes and as the Government picked up early indicators of this negative trend.

Financial and Monetary Support

To support Singaporean’s households, the Government decided to chip in S$ 1.9 Billion in the form of cash and rebates, and another S$ 6 Billion to support lower and middle income families. Businesses will get to enjoy support too as the Government will allocate S$ 1.3 Billion to help companies manage the cost of wage bills, rentals, utilities and others.

DPM Lawrence Wong further said that a lower economic growth is not an option and that the Government will pursue Growth by focusing on productivity and innovation going forward targeting at 2% to 3% each year over the next decade. This will be done by attracting high quality investments and the Government will allocate S$ 2 Billion in the form of refundable tax credits to companies onshoring here.

Singapore will also look to strengthen its current competitive advantages such as in the semiconductors, financials and the Government will allocate another S$ 2 Billion for the Financial sector. Another S$ 3 Billion will be added to the $25 Billion Research, Innovation and Enterprise (RIE 2025) fund, targeting at R&D to push for frontiers across the economy.

Harnessing present emerging technology such as AI will be one of the strategy and S$1 Billion will be allocated to achieve this though talent development and catalysing AI activities. Singapore will also allocate more resources to upgrade its mass market national broadband speeds to 10 Gigabits per second which is currently 10 times faster than average right now in the market.

Workforce Upgrade

Singapore’s local workforce is not getting side swept as the Government will disburse cash credits and monthly training allowance for local workers to get new skills training. Singapore will also increase minimum local wage for local employees to S$ 1,600 per month and the minimum hourly rate will be increased to S$ 10.5 per hour.

Families

He also stressed that Education has a special place and more subsidies will be provided so that families would feel less burden with preschool fees. To thrive in a more unpredictable future, the Ministry of Education (MOE) is placing more emphasis on competencies like adaptive and inventive thinking, communication skills, and civic literacy.

Energy

Singapore is also looking to address an emerging security challenge which is the energy sector. In the near to medium term, natural gas, which currently generates almost all of the electricity, will remain critical and Singapore is looking to build a new second LNG terminal.

To achieve Net Zero, apart from importing lower carbon electricity through new submarine cables, Singapore is exploring other options such as Hydrogen and Ammonia (which is a Hydrogen carrier), and Singapore will start testing and deploying these for Power Generation and Bunkering on Jurong Island. He further added that a transition from a system powered almost entirely by natural gas to one powered largely by clean energy will incur a significant effort and cost.

To import low carbon electricity, Singapore therefore will need to invest in building submarine cables, and if Singapore decides to pursue Hydrogen strategy, the Government will need to invest more new infrastructures for Generation, Storage and Delivery and all these will be costly and the Government will allocate S$ 5 Billion to support this initiative.

BEPS 2.0

Base Erosion Profit Shifting strategy has resulted in many Multinational Companies to shift their Headquarter to a more favorable tax jurisduction and hence, a BEPS 2.0 initiative was launched in order to claw back tax revenues for home grown countries. It consisted of 2 Pillars and Singapore will look to implement Pillar Two in 2025, which will introduce a global minimum effective tax rate of 15% for large MNE groups.

This will result in Singapore collecting more tax revenues, however, it could make Singapore see a reduction in tax base as MNEs are now re-evaluating their plans and strategies, and therefore, whatever additional revenues Singapore obtain from Pillar Two will need to be reinvested for Singapore to stay competitive in a post-BEPS world.

Fiscal Position

Singapore spending has increased from around 15% of GDP in the late 2000s to around 18% of GDP currently and to 20% of GDP by 2030 and for current ending fiscal year, the Government is expecting to end with S$ 3.6 Billion deficit or 0.5% of GDP. For nex fiscal year, the Government is expecting to end with a S$ 0.8 Billion in surplus which is balanced position.

EditorThe Future2024,budget,SingaporeSingapore's Prime Minister office has submitted to Singapore Parliament, the Government's financial policy for the FY 1 April 2024 to 31 March 2025 last week. Singapore's Deputy Prime Minister Lawrence Wong said that the international environment continues to be challenging and that the city state economy grew a meek...Your Industries Online