A. Performance And Outlook


A. Performance And Outlook

    Mr Speaker, Sir

  1. 1. I beg to move that Parliament approve the financial policy of the Government for the financial year 1 April 2023 to 31 March 2024.

Looking Back at 2022

  1. 2. Sir, we have been fighting COVID-19 for more than three years.
    1. a. It has been a long, hard slog, full of unexpected twists and turns, and I thank everyone for your cooperation, hard work, and sacrifices.
    2. b. Through our collective efforts, we have found our way through this pandemic.
    3. c. Yesterday we reached a new milestone and moved to DORSCON green.
  2. 3. In parallel, industries that were hardest hit by COVID-19 are seeing continued recovery.
    1. a. Demand has picked up for sectors like F&B and retail.
    2. b. Construction activities are back in full swing.
    3. c. Air travel has resumed, and Singaporeans are travelling again. SQ flights are filling up, pilots and cabin crew are busy flying, and Changi Airport is buzzing with life.
  3. 4. All in all, amidst a very challenging external backdrop, our economy grew by 3.6% in 2022. The resident unemployment rate, at 2.8% in December last year, is below pre-pandemic levels.
  4. 5. At the start of 2022, we had anticipated tightness in energy markets and supply chain bottlenecks.
    1. a. But the outbreak of the Ukraine war caught many by surprise.
    2. b. Despite it happening halfway across the world, the war set off a chain reaction of shockwaves throughout the global economy.
    3. c. Oil and gas prices shot up; we experienced a global shortage of grain and other food items.
    4. d. Some countries also imposed export bans to secure their own domestic needs, worsening global supply bottlenecks.
    5. e. Inflation was further fuelled by tight labour markets across many countries, partly because those who left the workforce when COVID-19 hit have not all returned. And companies had to pay higher wages to attract workers, adding to inflationary momentum.
  5. 6. So as many have observed, 2022 was a year of brutal inflation worldwide.1
    1. a. By the end of last year, global inflation was around 9%.2
    2. b. Inflation reached historic levels in many advanced economies – in the US, consumer prices were the highest in four decades; in Germany, they were the highest in nearly half a century.
  6. 7. Singapore, too, had to contend with these inflationary pressures.
    1. a. MAS tightened our monetary policy five times since October 2021.
    2. b. While this has helped ease the pressure on headline inflation, it is still higher than what Singaporeans are used to.
    3. c. So to address cost-of-living concerns, I rolled out three packages last year, totalling more than $3.5 billion, extending comprehensive support to Singaporeans, especially the lower- and middle-income families.

FY2022 Fiscal Position

  1. 8. We were able to fund these support packages from stronger-than-expected revenues, especially from corporate income tax and asset-related taxes in FY2022.
  2. 9. This additional revenue will also help to cover higher spending in other areas.
    1. a. In particular, HDB has ramped up its BTO supply to catch up with the backlog that had arisen from the COVID-19 delays.
    2. b. This means building more flats at a time when construction and land costs have increased, which in turn requires more funding resources.
  3. 10. In FY2022, we also drew on Past Reserves to fund our emergency COVID-19 public health expenditures.
    1. a. The President had earlier concurred with a draw of up to $6 billion from Past Reserves specifically for this purpose.
    2. b. Because the public health situation has since stabilised, we now expect to draw a lower amount of up to $3.1 billion from Past Reserves.
  4. 11. This brings the total expected draw on Past Reserves from FY2020 to FY2022 to $40 billion. (See Annex A-1.)
    1. a. This is lower than the initial draw of $52 billion that the Government had sought the President’s agreement for.
    2. b. It reflects our prudent approach in using our reserves – drawing on them judiciously, only when there are compelling reasons to do so.
  5. 12. So all in all, putting together our revenue upside with our higher spending, we expect a slight deficit of $2 billion, or 0.3% of GDP, for FY2022. (See Annex A-2.)
    1. a. We last drew on Past Reserves during the Global Financial Crisis in 2008. We spent $4 billion in FY2009 and were able to put back what we drew two years later due to the sharp recovery in the economy and in our fiscal position.
    2. b. This time, we are in a different position.
    3. c. Our economy has recovered back to pre-COVID levels. But we continue to be in a tight fiscal position.
    4. d. It is therefore highly unlikely that we will be able to put back what we have drawn from Past Reserves.
  6. 13. But we will not waver from our commitment to safeguard our reserves as a key strategic asset. They have helped Singapore to weather major global shocks, prevent high unemployment rates, and build up our capabilities even in the midst of economic downturns. Other governments spent more during this pandemic too. But they largely financed their additional spending by borrowing, which will eventually have to be repaid by future generations. In contrast, our reserves allowed Singapore to respond quickly without falling into debt, or burdening either current or future generations of Singaporeans.
  7. 14. So we will continue to uphold our practice of fiscal prudence and the principles that underpin the protection of our reserves.
    1. a. And this is why it was necessary to raise the GST rate – to ensure we have the resources to take good care of our seniors, and to keep a balanced budget over the medium term.
    2. b. I thank Singaporeans for your understanding of why we must continue to live within our means and contribute our fair share of revenues, and be good stewards of our reserves for the benefit of all Singaporeans – both now and in the future.

Outlook for 2023

  1. 15. For 2023, the key factor that will shape our growth is the global economy.
    1. a. For now, the picture is mixed and uneven, because while there are weaknesses in many parts of the world, the IMF and other economists do not expect a global recession this year.
    2. b. The EU is amongst the hardest-hit due to the economic consequences of its exposure to the war in Ukraine.
    3. c. The US is seeing slower growth, and may enter a recession, as the Federal Reserve continues to raise interest rates to combat elevated inflation. Even so, many economists expect any contraction to be mild.
    4. d. Asia is expected to continue growing this year. In particular, the COVID-19 infection wave in China has probably peaked. As China’s COVID-19 situation stabilises, and it continues to re-open its economy, the pickup in demand should provide a boost to the global economy.
  2. 16. Overall, based on current indications of global conditions, we expect positive but slower economic growth in Singapore of 0.5% to 2.5% this year.
  3. 17. But our economic fundamentals remain strong. Our handling of the pandemic over the past three years has enhanced our reputation as a reliable and trusted node in global supply chains. Our deep relationships with both the US and China, as well as partners in ASEAN and the wider region, make us a neutral and increasingly important place for global and regional businesses. We will take full advantage of these opportunities to attract new flows of investments, capital, talent, and ideas. All these will add vibrancy to our economy and create more good jobs for Singaporeans.
  4. 18. But there are major uncertainties and downside risks to this year’s forecast.
    1. a. A greater-than-expected decline in the US and EU economies could tip the world into recession.
    2. b. We may see an escalation of the Ukraine war or a prolonged conflict and stalemate, leading to new waves of disruptions that further weigh on global trade, as well as consumer and business confidence.
    3. c. We also cannot rule out a new COVID-19 variant that could be more dangerous and virulent.
  5. 19. Whether or when these events will happen cannot be predicted with certainty.
    1. a. But we must prepare ourselves for these risks and be ready to respond to them.
    2. b. We will therefore develop drawer plans, so that we have the ability and resources to take swift action should these downside scenarios materialise.


1 “2022 has been a year of brutal inflation”, The Economist, 21 December 2022

2 Source: IMF World Economic Outlook