Deputy Prime Minister Highlights Challenges and Measures for Economic Resilience
Inflation Forecast and Challenges
Inflation in Singapore is expected to peak within the next two to four months before easing towards the end of the year, according to Deputy Prime Minister and Finance Minister Lawrence Wong. Speaking in an interview with Bloomberg, Wong cautioned that while inflation may stabilise, it could settle at a higher rate than previously experienced due to geopolitical tensions, supply chain disruptions, and the transition to sustainable economies.
He highlighted that the historically low inflation rates of 0 to 1 per cent over the past decade were an anomaly and are unlikely to return. Wong emphasised the need to adapt to a “new equilibrium” where prices reflect the cost of greener practices and more robust supply chains.
Government Measures to Manage Inflation
To mitigate inflationary pressures, the Monetary Authority of Singapore (MAS) has tightened monetary policy four times in the last nine months. Additionally, the government announced a S$1.5 billion support package in June to assist vulnerable households with rising costs.
Wong reassured Singaporeans that the government remains vigilant, stating, “If the inflation situation were to worsen, we will certainly provide more assistance.”
Economic Growth and GST Changes
Beyond inflation, concerns over slower economic growth are also on the radar. The Ministry of Trade and Industry (MTI) recently adjusted Singapore’s GDP growth forecast for 2024 to 3 to 4 per cent, down from an earlier estimate of 3 to 5 per cent, citing weakened external demand and risks from the war in Ukraine, inflation, and geopolitical tensions.
When asked about the impending Goods and Services Tax (GST) hikes—rising from 7 per cent to 8 per cent in 2023 and to 9 per cent in 2024—Wong stressed the necessity of these changes to address revenue shortfalls. With an ageing population and increasing healthcare costs, additional revenue is needed to ensure fiscal responsibility and fairness.
He assured that lower-income households would be shielded from the impact of the GST hike through measures like the S$6.6 billion Assurance Package, introduced in 2020, which will provide sufficient offsets.
Fair and Progressive Taxation
Wong also addressed potential new forms of wealth taxation, affirming Singapore’s commitment to a fair and progressive tax system. “Those with greater means will contribute more,” he said, adding that this principle extends to both taxes and targeted government spending.
Highlighting Singapore’s achievements in the past decade, including broad-based income growth, high social mobility, and reduced income inequality, Wong acknowledged the need to continue fostering inclusive growth. “We will have to lean more towards ensuring that growth benefits everyone,” he stated.
The government aims to balance increased spending with equitable revenue collection, ensuring that Singapore remains resilient amid global uncertainties.
