2022 a time of transition as economy recovers: PM Lee

The year ahead will be a time of transition as the economy is recovering steadily after two years of the Covid-19 pandemic, Prime Minister Lee Hsien Loong said in his New Year address yesterday.

He also gave a hint that the upcoming increase in the goods and services tax (GST) will be tackled in Budget 2022, which will be unveiled on Feb 18.

PM Lee noted that Singapore needs a vibrant economy to generate the resources to realise its goals, and the Government must have reliable and adequate revenues to carry out its social programmes.

"It needs to raise additional revenues to fund the expansion of our healthcare system and support schemes for older Singaporeans. Those who are better off should contribute a larger share, but everyone needs to shoulder at least a small part of the burden," he said.

"This is the rationale for raising a broad-based tax like the GST, coupled with a comprehensive scheme of offsets to cushion the impact on lower-income households," he said.

"The GST forms one important component of our system of taxes and transfers that also includes income and wealth taxes. Overall, our system will remain progressive and fair."

He said this need had been seen coming for some years. "Now that our economy is emerging from Covid-19, we have to start moving on this. Budget 2022 will therefore lay the basis for sound and sustainable government finances for the next stage of Singapore's development."

First announced in 2018, the increase in GST from 7 per cent to 9 per cent is meant to help Singapore meet rising recurrent spending needs, especially in healthcare and social support.

A $6 billion Assurance Package has been set aside to cushion the impact of the hike, and enhancements to the existing GST Voucher Scheme are also forthcoming.

The Government has said previously that the planned GST hike would take place between 2022 and 2025, and sooner rather than later, taking into consideration overall economic conditions.

In his New Year address, PM Lee said that the Singapore economy is expected to grow by 3 per cent to 5 per cent this year.

He noted that while the Omicron variant has brought new uncertainties, Singapore is in a stronger position compared with two years ago, thanks to the roll-out of the vaccination and booster programme. This has allowed better management of public health challenges while minimising the hit on the economy.

Singapore will safely expand cross-border travel, and will press on to bring in much needed migrant workers as well as international talents who can complement Singaporeans.

In the longer term, Singapore must continue to seek out new growth areas and create new jobs, such as through pursuing trade liberalisation via the Regional Comprehensive Economic Partnership, which comes into force today.

He said the pandemic has been a crucible of fire for this generation of Singaporeans. The country has had to take drastic measures to protect lives and livelihoods, closing the borders for the first time in the country's history and also drawing heavily on its past reserves.

As a result, the country has been able to protect its healthcare system and prevent significant loss of lives, at the same time helping the economy recover from the worst ever global downturn, he said.

He called on Singaporeans to strenuously resist powerful external "tidal pulls" that will strain societal fault lines, and to maintain the core values that make them Singaporean even as societal norms evolve with successive cohorts coming of age.

"This requires us to keep up efforts to strengthen our social consensus and shared identity. We must continue forging trust and mutual understanding - both between the Government and the people, and among Singaporeans of all backgrounds," he said.

Going forward, the Government will strive to solidify the social compact to build a fairer, more inclusive and united Singapore. It will mend rifts deepened by the pandemic, help those who have fallen behind, enhance safety nets for the vulnerable, care for people's mental health, as well as meet the needs of an ageing society.

Observing how Singaporeans had supported difficult decisions and made many sacrifices, he said: "We can confidently say that we have measured up as one people... Looking ahead, confronted with longer-term challenges, we must maintain the same unity of purpose, fortitude of spirit and willingness to accept difficult measures in order to overcome them decisively and keep on progressing together."

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