SG Budget 2024: FY2023 ends with $3.6B deficit, 0.5% of GDP

SINGAPORE:  Deputy Prime Minister and Finance Minister Lawrence Wong on Friday (16 February) revealed that Singapore ended the fiscal year 2023 with a deficit of $3.6 billion, 0.5% of the country’s total gross domestic product (GDP).

This represents a substantial increase from the initial estimate of S$0.4 billion, mainly due to the unveiling of the S$7.5 billion Majulah Package during last year’s National Day Rally.

Despite the widening fiscal gap, there was an improvement in the primary deficit, as unexpectedly high operating revenue more than offset increased expenditures.

The fiscal outcome for FY2022 defied expectations by shifting from an anticipated deficit of S$2 billion to a surplus of S$1.7 billion.

In FY2023, total operating revenue has been revised to S$104.3 billion, reflecting a notable 7.9 per cent surge compared to the earlier projection of S$96.7 billion.

This also represents a substantial 14.6 per cent increase from the actual operating revenue of S$91 billion in FY2022.

During his Budget speech on Friday, DPM Wong remarked, “The additional revenue will enable us to finance new expenditures, including the S$7.5 billion injection into the Majulah Package fund.”

The superior-than-expected performance was primarily driven by corporate income tax, amounting to S$28.4 billion, surpassing the initial estimate of S$24.3 billion.

In 2024, Wong aims to achieve a small surplus of $0.8 billion, equivalent to 0.1% of Singapore’s GDP, emphasizing a “balanced fiscal position.”

“The overall stance is appropriate, targeting support for households and businesses even if the economy is projected to operate at around potential,” he said.

Aligning with this year’s theme, “Building Our Shared Future Together,” Wong acknowledges Singapore’s resilience in weathering challenges, emerging stronger. He highlights the significant strides taken to propel the nation forward.

“Growth is a prerequisite to create better jobs and raise living standards for all. [We want] to equip everyone to realise their potential and ensure everyone benefits from the nation’s progress… many find it hard to implement long term plans, but we can do so because of our healthy and sustainable fiscal position,” he added.

Personal income tax collection surpassed expectations, reaching S$17.5 billion

Moreover, personal income tax collection exceeded expectations, reaching S$17.5 billion, compared to the estimated S$16.8 billion.

Significant contributors to the heightened revenue included vehicle quota premiums, totalling S$4.7 billion (revised from S$3.9 billion), and other taxes, amounting to S$8.8 billion (revised from S$6.6 billion).

These encompassed the foreign worker levy, water conservation tax, land betterment charge, and annual tonnage tax.

Conversely, goods and services tax collection fell short of the projected S$17.4 billion, settling at S$16.4 billion.

The Ministry of Finance (MOF) attributed this shortfall to weakened imports.

The increased revenue more than offset the S$2.8 billion, representing a 2.6 per cent upward revision of total expenditure, which now stands at S$106.9 billion. This marks a 1.9 per cent increase from FY2022’s actual expenditure of S$104.9 billion.

Leading the higher-than-anticipated spending were the Ministry of Defence (S$19.8 billion, up from S$18 billion) and the Ministry of Health (S$17.9 billion, up from S$16.9 billion).

MOF explained that operating expenditure exceeded expectations due to the resumption of projects deferred during the Covid-19 pandemic and funding for public healthcare.

Additionally, development expenditure surpassed predictions due to increased spending in areas such as transport and economic development.

NIRC was S$0.6 billion lower than expected

Despite the implementation of a S$1.1 billion Cost-of-Living Support Package in September, special transfers remained largely stable at S$2.8 billion. The higher spending needs were partially offset by savings from existing schemes.

With these adjustments, the basic deficit narrowed from earlier estimates.

However, the overall budget deficit expanded due to increased top-ups to endowment and trust funds, primarily directed towards the Majulah Package, reaching a total of S$24.3 billion, up from the estimated S$16.8 billion.

The Majulah Package aims to provide Central Provident Fund bonuses to lower- and middle-income Singaporeans born in 1973 or earlier.

The net investment returns contribution (NIRC) was S$0.6 billion lower than expected, resulting in a revised overall budget balance of S$6.8 billion, widening from the initial estimate of S$3.6 billion.

The revised overall fiscal deficit of S$3.6 billion accounts for S$3.5 billion in the capitalization of significant infrastructure, less related interest costs and loan expenses.

FY2022’s fiscal surplus was attributed to higher actual operating revenue (S$91 billion, up by S$0.7 billion) and lower total expenditure (S$104.9 billion, down by S$2 billion from the previous estimate).