Government could save 1% of GDP in 2018 budget: BofAML

Thanks to Singapore's improved economic situation.

Given improved economic conditions, some analysts are more optimistic about Singapore's 2018 budget.

Bank of America Merrill Lynch (BofAML) forecasts that the budget's overall surplus could be around 1% of GDP versus the estimated 0.4%.

The primary deficit could be smaller, at less than 1% of GDP. This was smaller than the 1.3% deficit budgeted a year ago.

BofAML ASEAN economist Mohamed Faiz Nagutha commented, "First, on the likely realization for the FY2017 budget: a combination of conservative revenue estimates and better-than-expected economic performance means that the FY2017 budget position should come in healthier than the budgeted figures."

Such an outperformance "should not come as a surprise" because of Singapore's fiscal track record.

Moreover, the fiscal impulse is likely to be much smaller than the initially-estimated 0.6% of GDP and could come in closer to neutral, which will be appropriate, given that the output gap likely closed in 2017.

Nagutha added, "Given the brighter economic outlook, the FY2018 budget will likely have a longer-term focus. We look for a small primary deficit for FY2018, implying a close-to-neutral fiscal impulse."