Budget 2023: Expected Budget deficit of $0.4 billion for 2023, says DPM Wong
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The expected deficit is appropriate for the projected economic conditions in 2023, said DPM Lawrence Wong.
ST PHOTO: LIM YAOHUI
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SINGAPORE - A budget deficit of about $0.4 billion, or 0.1 per cent of gross domestic product (GDP), is expected for financial year (FY) 2023, said Deputy Prime Minister and Finance Minister Lawrence Wong on Tuesday.
This will bring the Government into deficit for two years in a row,
Mr Wong outlined these numbers as he spoke about Singapore’s fiscal position in his Budget statement.
He said the expected deficit is appropriate for the projected economic conditions in 2023, and gave the assurance that there are plans in place for swift action should economic conditions worsen.
He added that the Government will not need to draw on past reserves in 2023’s Budget as things return to normal.
In FY2022, stronger than expected revenues, especially from corporate income tax and asset-related taxes, helped to fund the three packages rolled out in 2022 to the tune of $3.5 billion to address cost-of-living concerns, he said.
This additional revenue will also cover higher spending in other areas, particularly in ramping up the supply of Housing Board Build-To-Order flats
Meanwhile, there was also a lower-than-expected draw on the reserves for Covid-19 emergency public health spending.
While President Halimah Yacob had earlier concurred with a draw of up to $6 billion for this in FY2022 ,
For FY2020, $31.9 billion from the past reserves was used for Covid-19 response measures, while for FY2021, $5 billion was used.
This brings the total expected draw on the past reserves to $40 billion for the three financial years of 2020 to 2022, less than the initial draw of $52 billion that the Government had sought the President’s agreement for near the onset of the pandemic.
Mr Wong said: “It reflects our prudent approach in using our reserves – drawing on them judiciously, only when there are compelling reasons to do so.”
Even then, he added that it was unlikely that the Government would be able to put back what has been drawn from the past reserves, which before Covid-19 were last drawn on during the 2008 global financial crisis.
The Government spent $4 billion in 2009, and was able to put back what was drawn two years later because of the sharp recovery in the economy, and Singapore’s fiscal position.
Mr Wong said Singapore’s economy may have bounced back to pre-Covid-19 levels this time, but the country continues to be in a tight fiscal position.
“But we will not waver from our commitment to safeguard our reserves as a key strategic asset,” he added.
He said Singapore’s reserves are the country’s greatest insurance, and have allowed the Government to respond quickly to immediate needs in an emergency without compromising the focus on the longer term.
Singapore was able to bounce back stronger from the pandemic because of the reserves, he added.
Other governments had borrowed to finance their additional Covid-19 spending, which future generations will eventually have to repay, he said.
In contrast, Singapore’s reserves allowed it to respond quickly without falling into debt, or burdening either current or future generations of Singaporeans.
While Singapore has been systematically planning ahead, there is no way to anticipate and cater for every scenario, he said. For instance, no amount of buffers or redundancies in the system can mitigate the extreme scenarios of blockages, conflicts, wars or climate disasters, he added.
“So our best safeguard in any crisis remains having access to the financial reserves we have accumulated over decades of prudent government,” he said.
“If we were ever to be hit by a bigger calamity or disaster, our reserves will provide us the resources to rebuild Singapore.”
He pledged to continue to uphold the practice of fiscal prudence
This is why it was necessary to raise the goods and services tax
“I thank Singaporeans for your understanding of why we must continue to live within our means and contribute our fair share of revenues, and be good stewards of our reserves for the benefit of all Singaporeans – both now and in the future,” he added.
