Singapore finance minister announces expanded social, corporate support in 2024 budget (updated)

Hong Leong Finance

16/02/2024 07:47

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      To boost support for households, healthcare 
    

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      Wong 'Cautiously optimistic' 2024 will be better year
    

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      Cannot seek growth at all costs due to local limitations -
Wong 
    

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      GDP growth for 2024 seen at 1%-3% 
    

  
 (Recasts, add details throughout)
    By Xinghui Kok and Joe Brock
       SINGAPORE, Feb 16 (Reuters) - Singapore's Finance
Minister Lawrence Wong on Friday told parliament the 2024 budget
would boost spending to counter inflationary pressures on
households and businesses in the city-state as its economic
outlook remains mixed. 
    The prime minister-in-waiting of one of the world's most
expensive countries said he was cautiously optimistic 2024 would
be a better year.
    "While we expect the inflation situation to improve this
year, there are uncertainties in the outlook," he said.
    Wong said support for households would be topped up by
another S$1.9 billion ($1.41 billion), while a S$1.3 billion
support package would also be introduced for companies,
including a corporate income tax rebate of up to S$40,000.
    A new tax credit would be created to support high-value
economic activities, manufacturing, research and development and
green transition, and S$3 billion would be added to an R&D fund,
as well as $$1 billion over five years for development of
talent, industry and artificial intelligence. 
    "The best way to deal with inflation is to ensure firms,
workers are more productive and that real incomes rise," he
said. 
    Inflation in Singapore has fallen from its peak of 5.5%
early last year but remains higher than pre-pandemic levels at
3.3% in December.
     
    TAX CHALLENGE
    The population of 5.9 million is also dealing with hikes in
sales tax that started last year, and an upcoming scheduled
increase in water tariffs. Wong said vouchers worth a total S$6
billion would be handed out to help with the sales tax hike.
    Economists have projected the government's fiscal position
would be expansionary, with DBS expecting an overall fiscal
deficit of 0.4% of GDP, and UOB estimating a deficit of 1.2%.
    Ahead of the budget, economists sought more details on the
implementation of pillar 2 of BEPS 2.0, an OECD project under
which more than 140 countries have agreed to bring the minimum
effective tax rate of large corporates to 15%.
    Wong said last year he intended to implement pillar 2 from
2025 but he would monitor the "fluid" international developments
and adjust the timeline accordingly.
    In Singapore, the current headline rate is 17%, but some
investors pay an effective rate that is as low as 4%. Wong last
year said BEPS 2.0 would give Singapore "less scope to use tax
incentives to attract new investments".
    Wong expected higher GDP growth at 1% to 3% this year after
it plunged from 3.8% in 2022 to 1.1% in 2023. 
    But GDP was not everything, he said, and the government
would not push for growth at all costs as there was a limit to
how fast the country could grow due to financial constraints and
issues over labour and land.
    The government will also spend an additional S$300 million a
year on healthcare support for its ageing population. 
    Singapore, he said, would be an "economy that benefits the
many rather than the few".

($1 = 1.3457 Singapore dollars)

 (Writing by Kanupriya Kapoor; Editing by Martin Petty)
 ((kanupriya.kapoor@thomsonreuters.com;))