BUDGET 2016 - Shaping our future together: Fiscal position

Govt cuts 2015 deficit despite lower-than-expected revenue

Skyline of Central Business District after office hours with Jubilee Bridge, on Mar 24 2016.
Skyline of Central Business District after office hours with Jubilee Bridge, on Mar 24 2016.ST PHOTO: LIM YAOHUI

Higher contributions from the Net Investment Returns (NIR) framework will allow the Government to cut last year's overall deficit.

Lower special transfer payouts for government schemes also helped to strengthen last year's fiscal position, even as operating revenue came in less than expected.

The overall deficit for 2015 was $4.88 billion, which was $1.79 billion, or 26.8 per cent, lower than the $6.67 billion deficit estimated in last year's Budget, according to revised figures. This came as the Government received $9.9 billion in NIR contributions, up $960 million, or 10.7 per cent, from the $8.94 billion estimated last year.

 

The NIR framework allows the Government to spend up to half of the long-term expected real returns from GIC and the Monetary Authority of Singapore. Temasek Holdings will be included in the framework from this year.

The boost from NIR contributions more than offset a 0.2 per cent cut in the revised operating revenue, which dropped $110 million from the estimated level to $64.16 billion.

"The increase last year could mean that the NIR contributors had better investment returns than expected, although it's really hard to say exactly why the Government raised the amount it drew," UOB economist Francis Tan said.

BUY US SOME TIME

...no matter the approach, the NIR contributions– even with the inclusion of Temasek – will only buy us sometime before we inevitably revisit the issues of rising spending needs in the years to come.

UOB ECONOMIST FRANCIS TAN

"But no matter the approach, the NIR contributions - even with the inclusion of Temasek - will only buy us some time before we inevitably revisit the issues of rising spending needs in the years to come. I hope by then we have figured out how to boost our revenues."

The revised data still showed a total expenditure of $68.41 billion, up $11.76 billion, or 20.8 per cent, from 2014's $56.65 billion.

The Government has unveiled several big initiatives in recent years in a bid to transform the economy while boosting the social safety net for an ageing population.

Last year, there were major investments in transport infrastructure, such as rail expansion projects and Changi Airport's development. Total development expenditure last year was $19.7 billion, $0.2 billion higher than originally estimated. Social development expenditure was $31.9 billion while $15.8 billion was spent on economic development.

However, the Government spent only $10.5 billion in total on special transfers, a drop of $1.1 billion, or 9.7 per cent, from the estimated amount. This was due to lower-than-expected payouts from subsidies such as the Productivity and Innovation Credit scheme and the Wage Credit Scheme last year, among others.

A version of this article appeared in the print edition of The Straits Times on March 25, 2016, with the headline 'Govt cuts 2015 deficit despite lower-than-expected revenue'. Print Edition | Subscribe