Budget 2012 Speech (Part 1): Economic Performance

An Inclusive Society, A Stronger Singapore. -AsiaOne
Fri, Feb 17, 2012
AsiaOne

A. Economic Performance

Mr Speaker Sir, I beg to move, that Parliament approve the financial policy of the Government for the Financial Year 1st April 2012 to 31st March 2013.
Our economy grew by 4.9% in 2011, within the 4% to 6% range that we had expected at the start of the year. However, our Budget for FY2011 is expected to have a surplus exceeding what we estimated a year ago.

FY2011 Fiscal Position

Our economy grew by 4.9% in 2011, within the 4% to 6% range that we had expected at the start of the year. However, our Budget for FY2011 is expected to have a surplus exceeding what we estimated a year ago.

We had originally estimated an Overall Budget Balance of $0.1 billion or 0.02% of GDP. We now expect higher corporate income tax collections, reflecting stronger corporate profits, and lower than expected claims for capital allowances. In addition, property-related taxes such as stamp duties increased sharply in the buoyant market. These temporary boosts to our revenues led to a larger Overall Budget Surplus for FY2011 of about $2.3 billion or 0.7% of GDP.

The Economic Context in 2012

For 2012, MTI expects Singapore’s GDP growth to be between 1% and 3%. We are already seeing weaker demand in our manufacturing sector, reflecting sluggishness in the developed markets. However, prospects remain positive for companies with markets or investments in Asia. They are continuing to hire and expand, although with some caution given the unpredictable global conditions. There will also be continued demand from the region for our services – in finance, logistics and tourism. Taken as a whole, Asia is providing some lift to our economy at a time of continuing economic weakness in the US, Japan and Europe.

Our economy will slow down this year, but we should look at this in perspective. We enjoyed an exceptional rebound in 2010. By the middle of that year, we had recovered the lost output from the 2008-2009 crisis[1]. Growth in 2011 too was healthy, at about 5%. Against this backdrop, a slowdown to 1% to 3% growth in 2012 is still consistent with our medium-term growth potential of 3% to 5%.

[1]: The economy is estimated to have recovered its potential GDP level within the first half of 2010. This is the level of GDP that would have been attained if the economy had been following its medium-term growth path, without cyclical ups and downs.

Our labour market is still very tight currently. Job creation remains positive overall, although we expect some easing in our export industries.

The principal focus of this year’s Budget is therefore not on providing a countercyclical boost to the economy, but on addressing Singapore’s longer-term challenges and building a better future for our people. It is a Budget for the future.

Nevertheless, we are monitoring global developments closely. There are still threats hanging over the world economy – in the Eurozone’s unresolved problems, in the tensions over Iran’s nuclear programme and in a US economy which remains vulnerable to setbacks. Should events take a sharp turn for the worse, we will be ready to act decisively, just as we have done in the past.

B. BUDGET 2012: An inclusive society, a stronger Singapore

Our mission is to build an inclusive society and a stronger Singapore.

A whole array of social and economic strategies is aimed at achieving this defining goal. It means upgrading our economy and developing deeper skills, so that we can sustain growth, create better jobs in every vocation and enable Singaporeans to earn better incomes. It means doing more to help children from poorer homes overcome early disadvantages, find their strengths and develop to their fullest potential, so that we keep social mobility up. Equally, we have to help our elderly live well, and provide stronger support for Singaporeans with disabilities – they all have a part in our nation’s progress and must share in its fruits.

Sustaining Economic Growth

Our first task is to upgrade and restructure our economy, so that we can grow by becoming more productive, and can rely less on expanding our workforce. We embarked on this new direction two years ago. Our aim is to achieve productivity growth of 2% to 3% per year, or in total 30% productivity growth over a decade. It is a challenging target.

We have made some progress in the last two years, but mainly because the economy rebounded strongly in 2010 after the downturn, with output growing much faster than the workforce. The core task of restructuring businesses and industries remains and must be our key economic priority. B.5. We will therefore take important further steps in this Budget to promote this necessary restructuring. We have to reduce our dependence on foreign labour, and do much more to build an economy driven by higher skills, innovation and productivity, as the basis for achieving higher incomes for Singaporeans.

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