The 2024 budget aims to cushion the impact of persistent headwinds while retaining Singapore’s competitiveness on the global stage
B2C firms should carefully devise their growth strategies this year, as demand dynamics in Singapore’s retail sector will remain highly complex. Active government support coupled with a likely easing in inflation and interest rates will support domestic consumption to some degree. However, given how quickly prices across the board have risen in the last two years and the fact that these pressures will remain to some degree this year, low- and middle-income consumers will remain price sensitive. Hence, executives should be careful before implementing major price increases in 2024. Looking beyond domestic consumers, B2C firms will benefit from a continued increase in tourist arrivals, supported by major concerts and sporting events that will occur in the coming months. Executives can expect growth in the tourism sector to significantly outpace growth in the domestic consumer sector and structure sales and marketing efforts accordingly.
B2B firms in Singapore will experience a complex macroeconomic environment this year, filled with tailwinds and headwinds. Government support for businesses in the form of tax incentives and loans will support a partial recovery in domestic investment and allow Singapore to retain its attractiveness to foreign investors. However, these firms will continue to face challenges in 2024 in the form of weak global demand, as well as rising labor costs due in large part to the government’s minimum salary hikes. Separately, firms serving the infrastructure sector should seek out opportunities to capitalize on the government’s increased spending in key sectors such as transport, education, and health.
Overview
- On February 16, Finance Minister Lawrence Wong released Singapore’s 2024 budget. The country’s total spending is projected to rise to SGD 111.8 billion (USD 83.2 billion) this year, a 4.6% increase from the revised 2023 budget.
- Within that figure, total operating expenditure is expected to increase by 3.6% YOY to SGD 88.5 billion, while development expenditure is expected to increase by 8.4% YOY to SGD 23.3 billion.
Our View
Singapore’s 2024 budget represents a substantive increase in spending compared to 2023. The budget aims to support households, bolster workforce development, and increase the economy’s competitiveness in the coming years.
Increased spending in the 2024 budget will be focused on a range of areas, including:
- Easing cost-of-living pressures: Over the last two years, households have seen cost pressures rise sharply. Unfortunately, they will remain under pressure to some degree in 2024 as well. To tackle this issue, the government plans to provide SGD 600 in vouchers to households and a cost-of-living special payment. It will also implement a personal income tax rebate of 50% in 2024, capped at SGD 200 to mainly benefit lower-middle-income workers.
- Providing additional support for workers: From July 1, Singapore will raise the Local Qualifying Salary, which is the minimum that local workers must be paid by an employer that hires foreign workers. For full-time workers, the salary will rise from SGD 1,400 to 1,600, and for part-time workers, the minimum hourly rate will be increased from SGD 9 to 10.5.
- Rolling out investment incentives and support for businesses: To help businesses facing high costs and weak demand, a 50% corporate income tax rebate, capped at SGD 40,000 will be provided for 2024, as well as an increase in the maximum capital loan amount. Moreover, firms that are not profitable will get at least SGD 2,000 in cash support. The government will also launch a new Refundable Investment Credit (RIC) for high-value economic activities to attract more investment, especially from foreign investors. The RIC will work as a credit to offset the corporate income tax payable. This new tax credit scheme will help to counteract higher costs due to the new global minimum tax rate of 15% for multinationals, which will take effect from January 1, 2025.
- Increased infrastructure spending: The government plans to spend SGD 1 billion over the next five years to build an artificial intelligence hub. It also plans to establish a Future Energy Fund with an initial investment of SGD 5 billion for the critical infrastructure needed for Singapore’s transition to cleaner fuels. The transport sector will also receive a major boost in spending of SGD 1.3 billion (a 9.8% YOY increase) to develop the domestic rail network and upgrade infrastructure and systems to support Singapore’s air hub. Moreover, spending in the healthcare and education sectors will rise by 4.6% YOY and 4.8% YOY, respectively, in part for the development of additional facilities in these sectors.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.
Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.