B. Dealing With Inflation
- 20. Inflation is the other major uncertainty in the global economy and a major concern for the world, and for Singapore.
- 21. And there are some early signs that global headline inflation rates are softening. But it is premature to declare victory.
- a. China’s re-opening will mean more demand for commodities, especially oil and gas, pushing up prices. And this will come at a time when Europe is still trying to secure more energy supplies.
- b. There are also signs of more persistent underlying inflationary pressures, especially with tight labour markets around the world.
- 22. We therefore have to brace ourselves for a period of relatively higher inflation, both globally and also in Singapore. We cannot say how long this will last, but we expect Singapore’s headline inflation to remain high, at least for the first half of this year.
- 23. The Government will therefore do more to help Singaporeans through this difficult period.
- 24. We will help businesses weather the immediate challenges of tighter financial conditions and higher energy prices.
- 25. I will extend the current enhancements to the Enterprise Financing Scheme for another year till 31 March 2024. This includes the 70% Government risk-share for trade loans, the enhanced maximum quantum for trade and working capital loans, and support for domestic construction projects via project loans. I hope this will also encourage financial institutions to continue extending credit to viable enterprises.
- 26. I will also extend the Energy Efficiency Grant for one year until 31 March 2024. This will provide continued support for businesses in the Food Services, Food Manufacturing, and Retail sectors to invest in energy efficiency, and thereby reduce the impact of higher electricity prices.
Enhancement of Support Measures for Singaporeans
- 27. We will also help Singaporeans tide through this period of higher inflation, and cushion the impact of the new GST rates.
- 28. There are two prongs to the support we provide for Singaporeans.
- a. One is the permanent GST Voucher, or GSTV scheme, which helps to permanently defray GST expenses for lower- to middle-income Singaporeans.
- b. The second is the Assurance Package, which provides transitional support to all Singaporeans to cushion the impact of the higher GST rate.
- 29. In last year’s Budget, I enhanced the permanent GSTV scheme and increased the number of Singaporeans who benefit from it. I will further enhance the permanent GSTV scheme so that
it continues to meaningfully defray GST expenses for eligible households.
- a. For those residing in homes with Annual Values of $13,000 and below, I will increase the GSTV Cash quantum from $500 to $700 in 2023, and to a further $850 from 2024 onwards.
- b. For those residing in homes with Annual Values of above $13,000 and up to $21,000, I will increase the GSTV Cash quantum from $250 to $350 in 2023, and then to $450 from 2024 onwards.
- 30. These enhancements to the permanent GSTV scheme ensure that most retiree as well as lower-income households will not be impacted by the GST rate increase. As I have emphasised previously, under our GST system – which means the GST and the GSTV combined – the more well-off consumers, as well as foreigners and tourists, will bear higher effective GST rates than lower-income Singaporeans. This ensures that those with greater means contribute their fair share of taxes, and will effectively lower the burden of taxes on lower- and middle-income Singaporeans.
- 31. On top of the GSTV, we have the Assurance Package, or the AP, to cushion the impact of the GST rate increase on Singaporeans. In November last year, I announced that I would review and
update the package to account for higher inflation. We have completed the review and will make the following enhancements in this Budget:
- a. I will increase the AP Cash by between $300 and $650 for eligible Singaporeans over the remaining years of the Assurance Package. This will bring the total AP Cash payments received by adult Singaporeans to between $700 and $2,250 over five years.
- b. I will increase the CDC Vouchers by $100 in 2024. So all Singaporean households can look forward to another $300 of CDC vouchers in January next year.
- 32. These enhancements to the Assurance Package will enable us to maintain the commitments we had set out earlier, which is to offset additional GST expenses for at least five years for the majority of Singaporean households, and for about 10 years for the lower-income households.
- 33. But I recognise that many Singaporeans are still concerned about the immediate cost-of-living issues. I will therefore introduce additional one-off support measures this year under the
- a. I will provide a Cost-of-Living Special Payment of between $200 and $400 for each eligible adult Singaporean.
- b. I will provide additional support for seniors and extend a Cost-of-Living Seniors’ Bonus of between $200 and $300 for eligible Singaporeans aged 55 and above.
- c. I will also double the U-Save Rebates provided to households over the next three tranches of disbursement this year. In total, eligible households can expect to receive up to $760 in U-Save Rebates this year.
- d. For households with children, I will provide each child aged six and below a top-up of $400 to their Child Development Account, and each older child a top-up of $300 to their Edusave account or Post-Secondary Education Account.
- 34. These enhancements to the Assurance Package, both the one-off and earlier ones, will cost $3 billion. So the total amount of the Package will increase from $6.6 billion to $9.6 billion.
- 35. With the enhancements to the GSTV scheme and Assurance Package, I will have provided comprehensive help for the majority of Singaporean households this year. On average,
- a. For lower-income households, the enhancements will fully cover the increases in spending due to inflation and the GST rate increase.
- b. For middle-income households, the enhancements will substantially cover their increases in spending.
- 36. Let me illustrate what Singaporeans can expect from these measures:
- a. A lower-income family with two young children will receive about $5,500 in benefits. This includes cash, Government top-ups to the CDA for their children, MediSave top-ups, U-Save and S&CC Rebates, and CDC Vouchers.
- b. Help will also be extended to middle-income households.
- c. And we have ensured that larger households, particularly those with seniors and children staying together, will receive more support. For example, a six-person middle-income household with two seniors and two school-going children will receive about $8,400 in benefits.
- 37. The full details of the enhancements to the GSTV scheme and Assurance Package are in the Annex. (See Annex B-1.)
- 38. The updates to the Assurance Package reflect the commitment of this Government to help Singaporeans through this challenging period of higher prices. We provided comprehensive support last year, and we are doing so again this year.
- 39. But I hope all Singaporeans understand that it is not fiscally sustainable to rely so heavily on Government support year after year to cope with inflation.
- 40. The reality is that even after the current inflation surge moderates, inflation may stabilise at a higher trend level globally, and in Singapore, than what we were used to in the last few decades. The era of untrammelled globalisation that kept goods at highly competitive prices all over the world is over. Countries are now relooking and adjusting their supply chains. Instead of buying from the cheapest, they are prepared to accept lower efficiency and higher costs to prioritise diversification and strategic resilience. These trends are pushing up inflation everywhere, including Singapore.
- 41. We do not have much influence over this global inflation picture. But our best strategy to cope with inflation is to make ourselves more productive and competitive – so that our workers earn more, and the increase in earnings can more than make up for the higher prices. Indeed, this was what happened last year – real incomes grew by 2.0% for the median worker, and by a higher 4.7% for a worker in the 20 th percentile.3 So despite higher prices, we are still better off in real terms.
- 42. We must therefore press on with economic restructuring and transformation, help businesses raise their productivity, and help workers upgrade their skills at every opportunity.
3 Based on latest figures in the Ministry of Manpower’s Labour Force in Singapore 2022 report.