Singapore fiscal surplus to register $6.4bln

Strong wage growth and buoyant corporate earnings are expected to bolster the official coffer, DBS said.

Tax revenue collections may hit $46.4 billion against the previous projectioin of $40.7 billion. Concomitantly, additional boost will come from the gaming tax revenue on account of the IRs and the strong stamp duty collections arising from buoyant property transactions.

Assuming that expenditure outlays do not exceed the budgeted amount substantially, and that the special transfers and the net investment returns contribution are more or less as projected, DBS should see an overall fiscal surplus of $6.4 billion (2.1% of nominal GDP). This is in stark contrast to a budgeted deficit of about $3 billion.

In terms of the budget position for FY2011, DBS foresees stronger revenue takings of about $47.6 billion on the back of a healthy economic expansion of 7% this year. Expenditure is likely to be higher given the rising costs and increased developmental outlays. However, given the massive surprise in the fiscal position for FY2010, the surpluses accrued in previous years and the objective of maintaining a balanced budget for the current term, the government will have enough ammunition to put forth another expansionary budget even if $4.9 billion is being plowed back to the national reserve. If the NIRC is assumed to come in at a fairly conservative $7 billion, the overall fiscal position for FY2011 should register a deficit of $2.2 billion, about 0.7% of nominal GDP.

But attention will surely be on the aggressive special transfer package that will attempt to redistribute the wealth created by the economy to the lower income group. Indeed, it’s time to use those accumulated fiscal surpluses to tackle a fundamental problem that came about with our rapid economic progress, that is, a widening income gap.