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 2006 to 31 March 2007.
1.2 The economy grew by 6.4% in 2005, much better
than expected. Growth was broad based, with strong
performances in both manufacturing and services.
EDB attracted $8.5 billion of fixed asset investments
in manufacturing, up 3% from 2004, and $2.5 billion
in annual total business spending from services,
up 11% from 2004. A record number of tourists
visited Singapore – around 9 million, boosting
the retail industry.
1.3 Most importantly, economic growth has translated
into jobs. 110,800 new jobs were created last
year, the largest number created in any year since
2000. We have reduced unemployment significantly,
to just 2.5% by the end of 2005.
1.4 Our fiscal position is good. I expect a budget
surplus of $430 million or 0.2% of GDP for FY2005,
slightly larger than I had projected in last year’s
Budget Statement. This is the result of healthy
investment income as well as efforts to contain
expenditures.
1.5 The outlook for 2006 is favourable. The US
economy continues to grow, underpinned by strong
consumption and investment expenditure. The EU
economy is expected to improve in 2006 as domestic
demand strengthens. China is still growing robustly,
having successfully managed the risk of overheating.
India is set to continue growing, especially if
it deepens its economic reforms. Japan is emerging
from deflation, with confidence restored, company
balance sheets de-leveraged and the banking system
strengthened.
1.6 The Southeast Asian economies are expected
to sustain their momentum. Investor confidence
is up, as reflected in the regional stock market
rallies. In Indonesia, the government has taken
major steps to slash fuel subsidies and raise
interest rates, and to strengthen its economic
team. Domestic demand should remain firm in Malaysia
and Thailand, bolstered by consumption and government
spending.
1.7 While the overall outlook is good, some downside
risks remain. The key risks are posed by the tightness
in the oil market and global macroeconomic imbalances.
Disruptions in world oil supply could cause prices
to spike sharply, while a disorderly unwinding
of the US current account deficit could have knock-on
effects on financial stability, exchange rates,
and trade liberalisation. The frothy housing markets
in some of the major economies and the threat
of Avian Influenza are also sources of concern.
1.8 Overall, if these risks are contained and
the major economies sustain their growth momentum,
I expect the Singapore economy to grow by 4-6%
in 2006, with inflation in check at 0.5-1.5%.
This will support further job creation.
1.9 Our strong performance results not only from
a favourable external environment, but also, more
importantly, from our efforts to upgrade and restructure
the economy. We must press on to adapt to changing
economic demands and secure our long-term competitiveness.
1.10 The pace of change worldwide is accelerating,
not slowing down. Other countries are also reinventing
themselves, and gearing up to compete globally.
In the Middle East, for example, the Gulf States
are on the move. They are investing in education
and infrastructure, attracting foreign investment,
building international companies like Dubai Ports
and Emirates Airlines, and using their oil and
gas revenues to create a sustainable long term
basis for growth and development.
1.11 In Singapore, we have embarked on a challenging
enterprise – to build a vibrant global city
that is a centre for knowledge, talent, and business.
We have every prospect of succeeding. We have
the drive and talent, the ability to adapt to
change, and the resolve to meet and overcome challenges.
Our workers, employers and the Government have
forged a strong tripartite partnership. Internationally
we have a trusted brand name, and a reputation
for integrity, quality, and reliability.
1.12 Globalisation favours economies like ours
– open, nimble, and enterprising. But it
also poses challenges, especially for our older
and low-skilled workers whose wages and jobs are
under growing pressure. We must do more to help
this group of Singaporeans improve their lives,
and to support their own efforts to do better
for themselves and their children. We must target
our assistance to those in need, and make a difference
where it counts.
1.13 This Budget will therefore:
- Support upgrading and restructuring of the
economy
- Help Singaporeans Move Forward Together
- Share the fruits of growth with all Singaporeans
through a Progress Package
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