Fiscal deficit to make up 11.4% of GDP in 2020: Fitch

Final deficit figure likely to fall at 7.2%.

Singapore is expected to record its largest-ever primary fiscal deficit of 11.4% of the GDP in 2020 from only 1.6% previously, in light of the $48b stimulus package announced on 26 March, reports Fitch Solutions.

The final deficit figure will fall at 7.2%, a narrower projection than the government’s own 7.9%.

The larger public deficit figure presents no significant risk to public finances and is likely one-off, noted Fitch. Further, Singapore has built up a strong fiscal position.

“Consensus estimates place [the value of fiscal reserve] above $500b, which is close to 100% of GDP and by this measure, Singapore likely has the largest fiscal reserves held by any government in the world.These formidable savings allows the Singapore government to enact further stimulus measures as necessary over the course of the COVID-19 pandemic and we do see the likelihood of further fiscal adjustments in 2020, but not to the same scale of the $48b resilience budget,” Fitch said in a note.

The report added that Singapore’s strict fiscal rules will ensure the country’s long-term fiscal health even in the ongoing crisis.

“The government is constitutionally barred from running an overall fiscal deficit during a Parliamentary term and the drawing down of reserves is considered loans that must later be paid back during better years. The Government’s strong track record of keeping to these rules and Heng’s affirmation of fiscal prudence during his speech suggests that the already formidable public savings will continue to grow over the long term after the COVID-19 pandemic subsides,” the note concluded.