Singapore handed down a well balanced budget that is set to lift local economic activity and assist key industries expand overseas.

$3.2 billion Grow and Share Package: The average Singaporean household will receive S$3,500 from this year’s Budget. This will come from the S$3.2 billion to be spent on the “Grow and Share Package” and S$3.4 billion in longer-term Social Investments for households this year.

All adult Singaporeans will also receive Growth Dividends to share the fruits of last year’s exceptional economic growth. The majority of Singaporeans – 80% – will get $600 to $800 each.

Tax cuts: Singaporeans will receive a personal income tax rebate of 20% for individual resident taxpayers for YA 2011. The rebate will be capped at $2,000. Taxes will be reduced significantly for middle and upper-middle income families. Marginal tax rates will be reduced for first S$120,000 of chargeable income.

Levy increase for foreign workers: The Government will also introduce more levy increases on foreign workers for all sectors this year. Most of the additional measures will be phased in at six-monthly intervals, starting only from 1 January 2012, and extending till 1 July 2013, one year beyond the previous schedule.

CPF rate revision: The Government will raise the employer contribution rate to CPF accounts by another 0.5 percentage points, from 15.5% to 16%, which will restore the total contribution rate to 36%. The additional 0.5% will go into the Special Account.

The Government will also revise the CPF salary ceiling from $4,500 to $5,000 per month to keep pace with income growth in recent years. This will align the salary ceiling back to the 80th percentile income, and help middle-income Singaporeans.

Radio and TV licence fees removed permanently: The annual licence fee of S$110 for televisions and S$27 for vehicle radios will be removed with immediate effect. Those who have not paid this year’s fees will not have to make the payment, while a refund will be given to those who have already paid.

Mr Tharman said that’s because the fees are losing their relevance. He said televisions are no longer limited to middle and higher-income groups, with 99 per cent of lower-income households owning them today.

S$10 billion home upgrading: $10 billion will be spent to upgrade homes and rejuvenate estates over the next 10 years. This is a major effort to preserve the value of HDB flats and will go towards the Home Improvement Programme (HIP), Neighbourhood Renewal Programme (NRP) and Lift Upgrading Programme (LUP), it will invest up to $55,000 per flat.

Low-income groups will also receive additional housing subsidies to better afford their homes. The Government will set aside S$175 million each year for the new Special CPF Housing Grant to help the bottom 50% Singapore households own their homes.

ECONOMIC PERFORMANCE

A.1. Mr Speaker Sir, I beg to move, that Parliament approves the financial policy of the Government for the Financial Year 1st April 2011 to 31st March 2012.

An Exceptional Year

A.2. Our economy has done exceptionally well in the past year. After two weak years in 2008 and 2009, when growth was close to zero, our GDP grew by a record 14.5% in 2010. Unemployment is down to the levels seen in early 2008, before the crisis.

A.3. We have recovered faster than most economies. The IMF has estimated how long various economies will take to get back to their potential GDP levels – in other words their potential based on longer- term trends. Singapore had recovered fully from the crisis by the second quarter of 2010, like Taiwan. Most other Asian economies did so by the end of last year, or will get back to their potential levels in the course of this year. However, the outlook for the US, the Eurozone and Japan is challenging, with recovery from the crisis expected to take at least another four years.

A.4. Our stronger recovery was partly good fortune, as global trade and confidence in Asia turned around. But it also reflected the way we prepared ourselves for the turn in the winds. We intervened during the crisis to help employers hold on to the workers they would need for the future, and to use the downturn to improve their skills. We also helped workers who lost their jobs to get back into the workforce, by matching them to new employers quickly.

A.5. Our companies made good use of our crisis measures, including the Jobs Credits, SPUR, and the Government’s loan guarantees under the Special Risk-Sharing Initiative (SRI). We were therefore ready to seize opportunities when the winds shifted. In short, our crisis strategy worked.

2011 Outlook – Opportunities and Risks

A.6. As we are now well past the rebound from the crisis, our economy will grow more slowly this year. But Singapore will continue to benefit from the global economic recovery, as well as the competitive edge we have gained over the last few years.

A.7. The external environment is however more complex this year. Growth in the emerging economies, which accounts for two-thirds of global growth, is expected to remain strong. However, these economies are also seeing a build-up of inflationary pressures. Food and other commodity prices have climbed sharply, because supply has been affected by harsh weather conditions while demand continues to grow in China and elsewhere. The political uncertainties in the Middle East have also driven oil prices up. There will not be early relief from these inflationary pressures. Further spikes in commodity prices could lower economic growth in Asia, if governments are forced to tighten domestic policies to control inflation.

A.8. The recovery in the advanced economies, especially the US, is picking up steam. Business investment has restarted and manufacturing activity is strengthening. These are the positives. However, these are only cyclical improvements, while growth prospects continue to be weighed down by structural difficulties. In particular, a combination of high long-term unemployment, weak housing markets and large household debts will depress consumption for some years. Heavy budget cutting in Europe, the UK and Japan, and the withdrawal of the fiscal stimulus in the US later this year, will also dampen growth. In addition, there remain risks in global finance. Problems surrounding sovereign debt in parts of Europe are causing concern.

A.9. We will have to watch the risks and be ready to respond if global growth falters. Overall, however, we face a positive environment for Singapore. The Government expects Singapore’s economy to grow by between 4% and 6% in 2011. This is still above our estimated trend growth of 3% to 5% for the next 10 years, and reflects the continuing momentum in the economy. Investments and activities are still flowing into Singapore, attracted especially by opportunities in Asia. The record investments that we saw in 2010 are also of an exceptionally high quality, and will create 21,300 new skilled jobs once these projects are fully realised.

A.10. However, inflation is a key concern for everyone this year, and especially for low-income families. CPI inflation was 4.6% year-on-year in December 2010. We expect inflation to be around 3% to 4% this year, higher in the first half before moderating later in the year. However, a large part of the CPI inflation increase can be explained by higher COE premiums and the higher imputed values of owner-occupied homes, compared to a year ago. For the majority of households, these increases do not mean substantially higher cash outlays. The Monetary Authority of Singapore’s (MAS) core inflation measure, which excludes the effects of these two factors on the CPI, is projected at 2% to 3% for 2011 as a whole.

Fiscal Position for FY2010

A.11. Our strong growth last year, far better than either the Government or the markets expected at the start of the year, has yielded an improved fiscal position for FY2010. The better growth is estimated to account for about 80% of the increase in revenues over what we projected a year ago. The property market was also much stronger, resulting in further increases in stamp duties and other revenues.

A.12. We had originally estimated an Overall Budget Deficit of $3.0 billion or about 1.0% of GDP for FY2010. Given the much improved economic performance, we now expect the overall budget to be close to a balanced position, with a small deficit of $0.3 billion or 0.1% of GDP.

Putting Back into Past Reserves

A.13. Members will recall that the Government had sought and obtained the President’s approval to draw $4.9 billion from Past Reserves, to fund the Jobs Credit Scheme and the Special Risk-Sharing Initiative under the Resilience Package. We were in the midst of a global crisis of unprecedented scale. Our access to Past Reserves gave us the resources and confidence to deal decisively with the downturn and to be prepared to take further measures if the situation worsened. In the event the amount drawn for these two schemes was $4.0 billion, less than expected.

A.14. We have recovered well from the crisis, putting our fiscal position on stronger footing. With the much lower deficit we achieved last year, as well as our good Budget position this year, we should be able to achieve an overall budget surplus during the current term of Government. We have thus decided to put back into Past Reserves the $4.0 billion that we had drawn earlier for the Resilience Package. I have informed the President of our decision.

A.15. There is no legal or constitutional obligation for the Government to return to Past Reserves any amount drawn. However, it is the responsible and prudent thing to do, once a Government has secured a stable fiscal position within its term. This is the way to uphold the philosophy that has enabled us to build up and maintain our reserves, and derive from it income each year to meet our strategic needs.<form style=”border:1px solid #ccc;padding:3px;text-align:center;” action=”http://feedburner.google.com/fb/a/mailverify” method=”post” target=”popupwindow” onsubmit=”window.open(‘http://feedburner.google.com/fb/a/mailverify?uri=EbelingHeffernanLTN’, ‘popupwindow’, ‘scrollbars=yes,width=550,height=520′);return true”><p>Enter your email address:</p><p><input type=”text” style=”width:140px” name=”email”/></p><input type=”hidden” value=”EbelingHeffernanLTN” name=”uri”/><input type=”hidden” name=”loc” value=”en_US”/><input type=”submit” value=”Subscribe” /><p>Delivered by <a href=”http://feedburner.google.com” target=”_blank”>FeedBurner</a></p></form>

Posted by Shayne Heffernan on Feb 20th, 2011and filed underAsia, Limelight.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site