Singapore budget deficit increases

Singapore’s Finance Minister, Tharman Shanmugaratnam, said yesterday that the budget deficient is much larger than predicted for this year as the government had to spend its way out of the recession and protect itself against the global downturn.

The trade dependent island fell into recession recently and the fact that the deficit is seemingly three times bigger than the initial S$800 million ($527 million), resulted in analysts indicating that this could represent itself in tax cuts.

The deficit is partly as a result of lower than expected economic growth and the stimulus package that the government undertook in terms of infrastructure developments incurred far higher costs than the budgeted S$6.4 billion surplus from the year before.

However, the government has stood firm indicating that the deficit is not actually a problem, as the onus is on benefiting the economy in the short to medium term, in order to make the country a stable place for financial activity.

In the context of the global economic slowdown, and also the use of the money spent, it is seen more an investment and so short cuts will not be made in order to make up the deficit.

Although further problems may be faced in the medium to long term if the global economy does not recover, as the exports are 70 percent non-oil products and with demand down form the EU and the US, the deficit may only continue to increase.

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