Singapore’s DPM Wong says Budget 2023 was ‘delicate balancing act’

SINGAPORE — Setting Singapore’s budget was challenging this year, as it required a “very delicate balancing act” to ensure fiscal prudence while helping Singaporeans deal with rising costs, Finance Minister Lawrence Wong told CNBC in an exclusive interview.

“It’s particularly challenging this year, because it really was a very delicate balancing act to manage due to the different competing demands and pressures,” Lawrence Wong, who is also deputy prime minister, said Wednesday, a day after announcing Singapore’s budget to Parliament.

“On the one hand, you had to try and get our fiscal position to a more sustainable one, especially after spending so much during Covid. But yet, we can’t taper down too quickly, because the economy is still weak,” Wong told CNBC’s Martin Soong on “Squawk Box Asia.”

Singapore expects a slight deficit of $2 billion Singapore dollars ($1.5 billion), or 0.3% of GDP, for fiscal year 2022. Wong said during the speech on Tuesday afternoon. That’s narrower than the previous estimate of S$3 billion.

“And because of inflation, many people want help with cost of living measures. And yet at the same time, if you do too much on cost of living, you may inadvertently push up inflation and fuel demand,” Wong said. “So how do you find the sweet spot?”

To help Singaporeans cope with inflation and the recent tax hikes on goods and services, he pledged an additional S$3 billion ($2.26 billion) on top of the S$8 billion for the support package previously pledged in 2022.

“In the end, we’ve tried to do that by tapering it down. It’s still a deficit, but much smaller, and focusing on groups that really need them,” the minister said, highlighting the need to prioritize economic competitiveness, helping families — especially those in lower income groups.

On Tuesday, Wong acknowledged that 2022 was a “year of brutal inflation worldwide” as pressures from rising costs of living continue to weigh on the economy. Singapore’s economy grew 3.6%, slower than the 7.6% growth in 2021.

“Our economy has recovered back to pre-Covid levels, but our fiscal position is still quite weak, and it is still very tight,” Wong told CNBC.

“That’s why we are very unlikely to be able to put back the reserves that we had drawn for this Covid-19 crisis.”

Singapore will not be drawing down on past reserves this year, it was revealed at the budget speech.

“Given the very tight fiscal context, we have to prioritize and measures in the budget are really meant to better position Singapore, our economy and our society for a future that we think will be more uncertain,” added Wong.