Budget 2022: $3b deficit expected in FY2022 as Budget remains expansionary

The Budget will continue to be expansionary for financial year 2022 to support the economy, with an expected deficit of $3 billion. ST PHOTO: KUA CHEE SIONG

SINGAPORE - The Budget is about using collective resources to build the country and improve the lives of Singaporeans, said Finance Minister Lawrence Wong in his Budget speech on Friday (Feb 18).

Mr Wong said: "The Budget supports spending on programmes for all in areas such as security, housing, education and health. Every dollar collected flows back to our taxpayers in one way or another."

These include providing Silver Support payments to lower-income seniors and Workfare payouts to lower-income workers, as well as health and childcare subsidies and the education that every child receives, he said.

The Budget will continue to be expansionary for financial year 2022 to support the economy, with an expected deficit of $3 billion, or 0.5 per cent of Singapore's gross domestic product.

This is smaller than FY2021's overall deficit of $5 billion, or 0.9 per cent of GDP.

The main items in this year's Budget include:

  • A $500 million Jobs and Businesses Support Package to provide targeted help for workers and firms facing slower recoveries, such as in the tourism, food and beverage, retail and sports industries.
  • A $560 million Household Support package to help Singapore families manage cost of living pressures, with more support for utilities and education-related expenses, as well as another set of $100 Community Development Council vouchers for households.
  • The earlier-announced $6 billion Assurance Package to cushion the impact of the goods and services tax (GST) hike will receive a $640 million top-up.
  • A new Progressive Wage Credit Scheme, which co-funds wage increases of lower-wage workers between 2022 and 2026, will receive an initial injection of $2 billion. The scheme complements the extension of the Progressive Wage Model to more sectors over the next two years, such as retail, food services and waste management.

Expected revenue and expenditure

An increase of $4 billion in total expenditure is expected in the coming year as Singapore spends more in the areas of health, defence and manpower.

Estimated ministry spending for FY2022 is $102.4 billion, up from the revised FY2021 estimate of $98.4 billion.

The Ministry of Manpower has an estimated expenditure increase of $2 billion due to the extended qualifying window of the Jobs Growth Incentive scheme to support hiring, and other Covid-19-related spending such as on recovery facilities for migrant workers.

The Ministry of Defence is estimated to spend $1 billion more in the coming financial year, with the resumption of activities such as training and exercises that were previously affected by the pandemic.

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The ministry is receiving an allocation of 16 per cent of the Budget, behind the 18.8 per cent given to the Ministry of Health (MOH).

Meanwhile, the MOH is projected to spend more on public health institutions, community hospitals and voluntary welfare organisations in aged care and long-term care sectors.

Ramped-up progress for development projects such as the Woodlands Health Campus, Singapore General Hospital (SGH) Emergency Medicine Building and SGH Elective Care Centre is also expected.

However, revenue for 2022 is projected to be $81.75 billion - $1.39 billion more than the previous year's revised estimates.

Higher collections from corporate and personal income taxes, the GST and vehicle quota premiums are estimated for FY2022, compared with revised 2021 figures.

The Net Investment Returns Contribution (NIRC) for FY2022 is expected to be $21.56 billion - a 6 per cent increase.

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Revised position for FY2021

The overall Budget deficit for FY2021 was pared down to $5 billion, from $11 billion as previously estimated.

The latest figure takes into account capitalisation of nationally significant infrastructure of $0.66 billion, after the passing of the Significant Infrastructure Government Loan Act in May last year to finance major, long-term infrastructure investments.

Revised operating revenue went up to $80.4 billion, up $3.8 billion from the $76.6 billion estimated previously.

The increase is mainly due to higher collections of personal income tax from higher-than-expected wage growth, stamp duty and vehicle quota premiums.

The revised figure for stamp duty collections is $6.5 billion, which is $2.2 billion higher than the budgeted estimate, as the property market was more buoyant than expected.

Vehicle quota premiums collected in FY2021 were estimated to total $3.2 billion, $0.9 billion higher than previously estimated.

Ministry expenditure for FY2021 was $98.4 billion - $3.9 billion lower than estimated previously.

Two key reasons for the drop were the lower spending needs for financing schemes in relation to Covid-19 as the economy continues to recover, and lower development expenditure due to construction delays arising from the pandemic.

At $20.3 billion, the NIRC last year continued to be the top contributor to government coffers, ahead of corporate and personal income taxes, and GST.

Since 2016, the returns on Singapore's invested reserves have been the single largest source of government revenue.

The NIRC comprises up to 50 per cent of the Net Investment Returns on net assets invested by sovereign wealth fund GIC, the Monetary Authority of Singapore and Singapore's investment company Temasek, and up to 50 per cent of the Net Investment Income derived from past reserves from the remaining assets.

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