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'Bumper surplus' for S'pore govt coffers expected this year
Publication Date : 18-02-2014
Economists expect to see a handsome surplus for the Singapore government coffers this financial year thanks to better economic growth last year.
Experts said they predict a better-than-anticipated surplus of up to S$6.5 billion (US$5.1 billion) for the year ending March 31 - well above the S$2.4 billion official estimate.
But the surplus looks likely to be more modest in the following fiscal year ending on March 31 next year due to higher social and infrastructure spending coupled with weaker tax collections amid a cooling property market.
The overall surplus is calculated by deducting expenditures, top-ups to endowment funds and special transfers from government operating revenues and investment returns.
Estimates obtained by The Straits Times show that economists expect the surplus to range from as low as S$3.6 billion to as high as S$6.5 billion for the financial year that ends on March 31.
The most bullish overall fiscal forecast came from Citi economist Kit Wei Zheng, who predicts a S$6.5 billion "windfall surplus". "Bumper operating revenues will likely result in the 10th consecutive year of fiscal outperformance in 2013," he noted.
Among the more conservative assessments is from CIMB economist Song Seng Wun, who said he is pencilling in a S$3.6 billion figure due to a higher-than-expected expenditure.
OCBC Bank economist Selena Ling said on Monday that the key question lies in the assumptions on government spending. If the government has spent according to its estimated S$53.4 billion by ramping up spending in the last two fiscal quarters, then the budget surplus will be likely "fairly close" to the $2.4 billion official projection, she said.
But if spending has been more conservative and closer to what was spent during the same period in the last fiscal year, then the surplus may surge to as high as $6 billion to S$7 billion, she added.
One key reason for the anticipated higher surplus is last year's economic growth, which is tipped to come in at close to 4 per cent - well above the initial official forecast of between 1 per cent and 3 per cent.
DBS Bank economist Irvin Seah, who is predicting a S$5.1 billion surplus, said: "Against a backdrop of buoyant economic conditions, healthy wage growth and resilient corporate earnings would have bolstered the official coffers."
The upbeat overall economic growth should translate into bigger collections of personal income tax, corporate tax and goods and services tax (GST).
"Stronger GDP (gross domestic product) growth last year than earlier projected, plus hikes in property-related stamp duties, has boosted revenue," said Bank of America Merrill Lynch economist Chua Hak Bin, who predicts a S$6.3 billion surplus.
He expects operating revenue to come in at S$59 billion - above the government's estimate of S$55 billion - noting that stronger revenue increases are coming from GST and property taxes this time.
But taxes from vehicles are set to fall by nearly 15 per cent due to car loan tightening measures introduced last year, said United Overseas Bank economist Francis Tan.
Economists are predicting a more modest surplus of around S$0.9 billion to S$5.2 billion for the next fiscal year, which ends on March 31 next year.
Kit, who has forecast a S$2.7 billion surplus for the next fiscal year, said weaker stamp duty and asset taxes on the back of a housing market downturn should be partly offset by higher income-tax takings. Expenditure should rise due to higher infrastructure and social spending, he added.
Seah said he expects a "generous" S$9 billion special transfer introduced to "alleviate the well-being of the less fortunate". "While strengthening inclusive growth will continue to be the focus, the recently announced Pioneer Generation Package will likely take the spotlight," he added.
*US$1 = S$1.26