Mr Speaker, Sir

1.1 I beg to move that this Parliament approve the financial policy of the Government for the financial year 1 April 2005 to 31 March 2006.

2004 – Broad based growth and fiscal recovery

1.2 The Singapore economy rebounded strongly in 2004. It grew by 8.4%, one of the fastest in Asia. This was the result of a strong recovery in global demand, supportive monetary and fiscal policies, and our efforts to restructure the economy. The manufacturing sector grew by nearly 14% and the services sector by 7.5%. The growth was broad based. On most indicators – investment commitments, tourist arrivals, consumer confidence – we have bounced back to or exceeded pre-SARS levels. However, a few sectors still lag behind – for instance, the construction industry and small retailers.

1.3 Most importantly, employment has gone up. Last year, the economy created more than 66,000 jobs. The total number of persons employed reached a new high of 2.2 million in December 2004. Job vacancies are at a three year high. Unemployment has also come down: the seasonally adjusted unemployment rate stood at 3.7% in December 2004, compared to 4.6% the year before and 5.5% at the trough of the slowdown.

1.4 Since my last Budget Speech, the Government’s fiscal position has improved significantly. Last year I projected a deficit of $1.35 billion for FY2004. Now our revised position shows a surplus of $160 million. This is not because operating revenues exceeded our estimate; in fact they came in slightly lower. However, lower spending by ministries and higher Net Investment Income (NII) from our reserves helped to improve the budget position substantially. Members can refer to the new Budget Highlights document that will be distributed at the end of the Budget Statement for more details of the revised budget position in FY2004.