Singapore Prime Minister in waiting, Lawrence Wong delivered the island states 2024 Budget yesterday, which Maybank IB notes that it was expansionary and catering for more balanced spending that provides across- the-board support to corporates and households, while rolling out the first instalment of the Forward Singapore programmes.
As opposed to last year’s budget which was more focused on supporting lower income households and wealth re-distribution, Budget 2024 has an “investment tilt” – geared towards incentivizing investments in green transition, human capital, critical infrastructure and high quality FDI. A small surplus of S$0.78bn (0.1% of GDP) is projected for FY2024, the first planned surplus in 7 years. The figure includes a S$4.1bn non-cash addition arising from the capitalization of nationally significant infrastructure. The basic deficit (S$6.1bn) will be larger compared to FY2023 (S$5.4bn), as higher expenditure and special transfers outstrip an increase in operating revenue due to GST and property tax collections.
Top-ups to endowment and trust funds amount to S$20.4bn (vs. S$24.3bn in FY2023), with the largest allocations for defraying the GST impact (GST Voucher Fund) and spurring the green transition (Future Energy Fund) Budget FY2023 overall deficit (i.e. net fiscal position) came in at S$3.6bn (0.5% of GDP), larger than the projected S$0.36bn (0.1% of GDP), due to the S$7.5bn Majulah Package top- up. This was despite higher-than-expected revenues, and was below our expectations of a surplus.
Notably, Maybank IB says the actual FY2022 fiscal balance turned out to be a S$1.7bn surplus, as opposed to MOF’s previous estimate of S$2.1bn deficit, due to stronger-than-expected revenue and lower expenditure.
In view of the announcements, the house maintains its GDP growth forecast at +2.2% in 2024 and +2.1% in 2025. The cost-of-living measures it said will help cushion the impact of GST and inflation on lower and middle-income households in the immediate term. However, the near-term relief measures for firms are relatively modest, providing less help to smaller and less profitable companies. These firms will continue to face pressure from the slew of increases in their wage bills, rental, utilities, etc. That said, the longer-term schemes will help improve productivity and raise social inclusivity, boosting long-term growth.
Equities impact: Positive for Financials, Energy transition Plays, Consumer Staples, Tech, Healthcare; Developers Marginally supported by ABSD Tweaks Enhanced support schemes and fiscal transfers for SMEs, lower-income households and retired/unemployed population to support basic consumption and defray inflationary pressures should lower asset quality risks for banks. Banks and the exchange can potentially benefit from top-ups for Financial Sector Development Fund, additional funding for AI and set up for the Future Energy Fund. Investment tax credit schemes can spur advanced manufacturing-related loan growth.
Companies involved in energy transition will also benefit from these measures.
Counters in the consumer sector such as super market operators and sub-urban retail landlords stand to benefit from various cash payouts and income tax rebates. Tech players may benefit from higher R&D related tax rebates and potential partnerships/collaborations with AI companies. Higher healthcare subsidies should benefit healthcare operators from more patient load. Lower ABSD claw back rate on achieving at least 90% of sales within prescribed timeline should give developers
more flexibility. Property agencies are likely to benefit from potentially higher sales volumes as single senior citizens can now right-size and claim ABSD refund.
