Budget 2021: Expected deficit of $11b in 2021 with continued efforts to tide Singapore over Covid-19 crisis

2020's expansionary Budget is expected to run Singapore's largest deficit since independence
2020's expansionary Budget is expected to run Singapore's largest deficit since independenceST PHOTO: LIM YAOHUI

SINGAPORE - The Budget will continue to be expansionary for financial year 2021, with an expected deficit of $11 billion, or 2.2 per cent of Singapore's gross domestic product.

This is as it continues to tide Singaporeans and businesses over the coronavirus pandemic with the $11 billion Covid-19 Resilience Package, said Deputy Prime Minister Heng Swee Keat on Tuesday (Feb 16).

Last year's expansionary Budget is expected to run Singapore's largest deficit since independence, with an overall deficit of $64.9 billion, or 13.9 per cent of gross domestic product.

"The deficit is driven by lower revenues due to dampened economic activity and the significant expenditures needed to mount a decisive response to Covid-19," said Mr Heng, who is also Finance Minister.

Measures rolled out in this year's Budget will help Singapore emerge stronger, by pressing on with economic and workforce transformation, strengthening social compact and building a sustainable future for its people, and will impart a considerable fiscal boost to the economy, he added.

Revenue and expenditure for 2021

Revenue for 2021 is projected to be $76.6 billion, which is $12 billion or 18.6 per cent more than the previous year's revised estimates.

This is largely due to higher corporate income taxes, goods and services taxes and other taxes such as foreign worker levies.

But this increase will also be moderated by lower personal income taxes.

Betting taxes are expected to go up by about 30 per cent to $2.4 billion.

Meanwhile, the ministries' expenditures are projected to come in around $102.3 billion, some $8.3 billion or 9 per cent higher than revised 2020 estimates.

This is largely due to larger spending on healthcare, transport and defence, which is partly offset by lower trade and industry spending as well as national development expenditures.

Transport spending will go up by $3 billion, or 37.8 per cent, with the resumption of construction activities and higher provisions for Covid-19 relief measures, especially for the hard-hit aviation sector, which will receive additional support and extended cost relief amounting to around $870 million.

In addition, healthcare spending will also go up, mainly to cater for the growth in patient subsidies with the opening of new facilities, ramping up of capacity ahead of the opening of the Woodlands Health Campus, and increasing demand for health and aged care services as Singapore's population ages.

On the flip side, trade and industry spending is expected to come down with the tapering off of economic relief measures.

Boost from net investment returns

The net investment returns contribution (NIRC) continues to be the largest contributor to government coffers, and is expected to bring in some $19.6 billion in 2021 - a 7.8 per cent increase over 2020.

The returns from Singapore's invested reserves have been the single largest source of government revenue since 2016, outweighing tax revenue sources such as corporate and personal income taxes and the goods and services tax.

The NIRC comprises up to 50 per cent of the net investment returns on net assets invested by the Monetary Authority of Singapore (MAS), GIC and Temasek, the three entities which manage and invest Singapore's reserves, and up to 50 per cent of the net investment income derived from past reserves from the remaining assets.

The net investment returns framework was introduced in 2008, with the reserves managed by GIC and MAS, while Temasek was included in the framework in 2015.

Read next: Highlights of Budget 2021 - From household vouchers to GST on imported low-value goods bought online