Singapore’s fiscal position

Spending up, but surplus still likely

Extra outlays offset by $14b from net investment returns contributions

Expenditures will likely be higher this year due to outlays in areas such as public housing, healthcare and security but there should still be an overall budget surplus.

While the extra spending will more than double this year's primary deficit compared with 2016, sustained contributions from net investment returns (NIR) will be the key to ending in the black.

The NIR framework allows the Government to spend up to half of the long-term expected real returns from the GIC, the Monetary Authority of Singapore and Temasek Holdings.

A total expenditure of $75.07 billion was pencilled in for 2017, up from 2016's $71.39 billion, according to the fiscal position figures. The increase will more than offset the rise in operating revenue from $68.67 billion last year to $69.45 billion. National development expenditure will jump by $1.3 billion to $4.8 billion on higher public housing spending, while healthcare outlays will rise by $0.9 billion. Home affairs spending will go up by $0.7 billion to $5.8 billion, mainly to enhance security capabilities.

As a result, the Government is eyeing a primary deficit of $5.62 billion this year, a marked increase from 2016's $2.72 billion.

  • $1.91b

  • Estimated overall Budget surplus for 2017 financial year

Still, the 2017 Budget will end with an overall surplus of $1.91 billion, thanks largely to $14.11 billion of NIR contribution - comparable to last year's record high of $14.37 billion.

The NIR framework was changed in 2015 to start including contributions from Temasek Holdings to help finance increased levels of social and infrastructure spending.

"As we expect expenditures to continue rising in the long term, this budget position is prudent, while supporting firms and households in the midst of continued economic restructuring," Finance Minister Heng Swee Keat said.

DBS senior economist Irvin Seah agreed, calling the Budget "balanced and prudent".

"The Government can't keep depending on high levels of NIR (contribution) because it will fluctuate, which is why they are looking at growing revenue, for example, through the new carbon tax," Mr Seah said. The tax will likely kick in from 2019.

"It also makes sense for the Government to tighten control over ministry budget caps if they plan to maintain spending on restructuring efforts and social support," he added, referring to a permanent 2 per cent reduction to the budget caps of all ministries and organs of state.

Aside from the higher expenditure, the Government is also ramping up special transfers for many of its schemes.


About $2.07 billion will be set aside for special transfers to businesses this year, including $910 million for the Wage Credit Scheme. Around $1.5 billion will be injected into the GST Voucher Fund this year to help households.

Meanwhile, the National Research Fund will receive a $500 million top-up while the National Productivity Fund will get $1 billion to support industry transformation.

But Mr Heng warned: "We will have to raise revenues through new taxes or raise tax rates. We are studying the options carefully."

UOB economist Francis Tan said: "This is a very strong message to pre-empt Singaporeans. The Government didn't touch the tax regime too much to avoid rocking the boat amid the economic challenges. But those changes are imminent - the hint cannot be stronger."

Correction note:  The sub-headline has been edited for clarity.

A version of this article appeared in the print edition of The Straits Times on February 21, 2017, with the headline 'Spending up, but surplus still likely'. Print Edition | Subscribe