SINGAPORE: Despite booking a slower GDP growth of 1.2 percent last year, economists expect Singapore's fiscal surplus to surprise on the upside for FY 2012.
The projections, which range from S$1.6 billion to nearly S$5 billion, surpass the government's estimates of a S$1.27 billion surplus for the year.
The record number of new homes sold last year despite additional cooling measures and the high property prices are likely to prop up government revenue for FY2012.
Vishnu Varathan, market economist at Mizuho Corporate Bank, said: "If you are looking at adding to the coffers by 30 to 40 per cent, that is not unimaginable given how heated activity was in the property market. Overall, the surplus should come up much stronger than expected and I think that reinforces that Singapore runs a pretty strong budget position year after year."
In addition, economists say motor vehicle taxes, rising COE premiums as well as higher foreign worker levy will all add to the state's coffers.
Meanwhile, corporate and personal income taxes and the Goods & Services tax will remain top revenue generators, accounting for more than half of total operating revenue.
Taking into account higher expenditure outlays due to higher than expected inflation, DBS Bank forecasts a S$1.62 billion overall fiscal surplus for 2012.
Meanwhile, OCBC Bank projects a S$4.96 billion overall surplus while keeping expenditure unchanged from initial estimates.
Economists say with the higher surplus, the government could offer some incentives help lower income households and businesses cope with rising cost.
However, it is unlikely to do a U-turn on foreign manpower policies. In fact, economists expect the government to further tighten foreign labour rules, albeit at a more moderate pace to allow more time for companies to restructure.
Broadly, they expect Budget 2013 to focus on boosting productivity and fostering inclusive growth.
Some economists say the upcoming budget could also focus on interim projects that will be undertaken over the next few years to complement the longer term objectives and targets set out in the Population White Paper.
Among the government's future plans are the doubling of rail networks in Singapore and building another 700,000 homes by 2030 to support a larger population.
Social expenditure could also increase to cater for an ageing population
Irvin Seah, senior economist at DBS Bank, explained: "As the population continues to age in the next 10 to 20 years, social expenditure would continue to rise. Furthermore, the government is embarking on infrastructure capacity expansion exercise. This would be the most extensive and most comprehensive infrastructure expansion exercise ever since independence.
"Those two considerations will definitely take a toll on the fiscal position therefore there is a need to raise the tax revenues. Hiking GST is out of the question due to political concerns. The only area where there is room for increase in tax rate would be income tax rate so we expect a hike of one to two percentage point for income tax for the top income brackets in the upcoming budget."
Different tax rates apply for Singapore residents at between two per cent and 20 per cent depending on the chargeable income for the year.
Currently, Singapore has one of the most competitive personal income tax rate in the world.
The government will announce the Budget on February 25.
- CNA/fa
S'pore's fiscal surplus for FY2012 expected to surpass govt's estimates: economists
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S'pore's fiscal surplus for FY2012 expected to surpass govt's estimates: economists
