Singapore budget surplus could surpass $5b in FY2013: OCBC

As recent quarters put up impressive revenues.

While the official Singapore budget for FY2013 is only projected to run an overall surplus of $2.4b, OCBC argues that it can reach upwards of $5b due to the impressive operating revenue in the first three quarters of the fiscal year and if the ast two quarters of the fiscal year post more conservative expenditure.

Here's the complete analysis from OCBC:

The FY2013 Budget is projected to run a primary surplus of $1.62b, basic surplus of $0.32n and an overall budget surplus of $2.42b.

However, operating revenue for the first three quarters of FY2013 has been stronger than initially estimated, especially for asset taxes and other taxes (which comprises of foreign worker levy, annual tonnage tax, water conservation tax and development charges), so the potential for a healthier than expected budget out-turn for FY2013 looks likely given the stronger-than-expected GDP growth in the second half of the year.

There is still the question of what happens for FY2013 expenditure since only two quarters of the fiscal year are available at this juncture. Basically there are two possible outcomes:

a) If ture to form, the government spends according to its FY2013 estimates of $53.41b by ramping up spending in the last two fiscal quarters of the current FY, we estimate that the budget surplus could still be better than expected at around $3.9b (equivalent to 1.09% of GDP). This is about 63% higher than the $2.4b (equivalent to 0.7% of GDP) initially projected for in the FY2013 Budget, but still a more conservative scenario than (b).

b) If the total expenditure for the remaining two quarters is more conservative and closer to what was spent during the same period of FY2012, then the budget surplus may surge to exceeed the $5b that we saw back in the revised FY2012 budgetary position, possibly even as high as $6-7b (up to 1.9% of GDP) although this is a less likely scenario in our view. If this materializes, it may be the largest surplus seen since the pre-crisis days of 2007 which clocked in at $6.46b surplus (equivalent to 2.4% of GDP).