The report by the credit rating agency Fitch Ratings (Fitch) on Wednesday (19 Feb) addressed the fiscal space as it relates to the recent announcement of Singapore’s fiscal stimulus measures.
The report notes that the country has maintained an “exceptionally strong external and fiscal balance sheets” and the newly announced large fiscal stimulus package does not “jeopardise Singapore’s ‘AAA’ rating” in terms of country risk assessment.
In spite of the higher budget deficit due to the large S$6.4 billion fiscal stimulus package to revitalise the economy and combat Covid-19 outbreak, Singapore’s public finances remain sound.
According to the estimates by Fitch, general government balance is expected to remain in a “healthy surplus” at 0.5 per cent above GDP this year. This also includes receipts from land sales as well as contributions to and payouts from the Central Provident Fund.
Fitch looks favourably on the government’s conservative approach to management and opined that the country’s public finances are on a sound foundation. The report highlighted that “despite the increased deficit, the government will still meet its rule of maintaining a balanced budget over the course of a single parliamentary term”.
Singapore’s fiscal stimulus policy to bolster the impacted economy is similar to the policy also adopted in other countries in the region. For example, the Chinese, Japanese, South Korean and Malaysian governments have shown a willingness to boost fiscal support in the midst of the Covid-19 outbreak. Hong Kong also may post the biggest deficit ever in the its budget for FY2020, as commented by Hong Kong’s financial secretary, Paul Chan.
Singapore’s economic growth has been projected by Fitch to be nearer to 0.6 per cent, with contractionary risks lurking, depending on how the tide of viral outbreak will develop.
The most recent budget, which Fitch expects to be the final one before the next election, has also placed emphasis on the country’s long-term challenges such as boosting productivity and dealing with population ageing.
On Tuesday (18 Feb), budget 2020 was unveiled by the Deputy Prime Minister and Finance Minister Heng Swee Keat. During his speech, Mr Heng pointed out that FY 2019’s budget deficit was S$1.7 billion at 0.3 per cent of GDP. As for this FY 2020, the an overall deficit of S$10.9 billion at 2.1 per cent of GDP is expected by the government.