1.5 This year, the US is likely to enjoy
steady growth of around 3-3.5%. While the huge US current
account deficit poses risks to both the US and the international
economy, this is a medium term issue. China’s economic
growth will moderate from its recent blistering pace,
but will still be strong enough to boost the rest of Asia.
India, with whom Singapore is negotiating a Closer Economic
Cooperation Agreement (CECA), is also continuing to deregulate
its economy.
1.6 In Southeast Asia, consumer and business confidence
is up. In Thailand, Prime Minister Thaksin Shinawatra
is pushing vigorously for economic development and growth.
Vietnam’s economy will continue to take off and
offer new opportunities. With Malaysia, our economic
cooperation is intensifying. Indonesia under President
Susilo Bambang Yudhoyono is starting to tackle the country’s
micro- and macroeconomic problems, such as fuel subsidies
and the fiscal deficit, and is wooing foreign investments,
especially in infrastructure projects.
1.7 There are some downside risks – a sharper
than expected downturn in the global electronics industry,
another spike in oil prices, or a terrorist incident
in the region that shakes confidence – but overall
I am cautiously optimistic.
1.8 MTI expects the Singapore economy to grow by 3
to 5% this year. This is a moderate rate of growth compared
to 2004 when the economy was still recovering from a
low base. But it is in line with our economy’s
sustainable rate over the medium-term, and will continue
to create jobs for Singaporeans.
1.9 The positive economic outlook augurs well for our
fiscal position. In FY2005 we project a budget surplus
of $940 million or 0.5% of GDP before taking into account
the tax changes and special transfers I will announce
later. We expect operating revenues to grow by nearly
$1 billion, or 3.4% over FY2004, to $28.8 billion. This
is due largely to higher personal income tax collection
as a result of the higher incomes in 2004. Total expenditure
in FY2005 will come in at about $29.7 billion, just
1.6% higher than in FY2004.
1.10 We again expect total expenditure to exceed our
operating revenue – that is, the revenue from
taxes, fees and charges. This has been so for the last
three fiscal years, and will continue for the medium
term. We are able to reduce this deficit substantially
and run modest overall budget surpluses only because
of the NII contribution. Without it, we would either
have to cut back on the level of public services, or
raise taxes, fees and charges significantly.
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