Wednesday, November 19

Budget deficit to triple

Posted by at

Nov 18, 2008
Budget deficit to triple
By Goh Chin Lian, Political Correspondent

THIS year's budget deficit is likely to balloon to over $2.4 billion, more than three times larger than initially estimated by the Government.

Higher infrastructure cost, additional spending on procreation measures and lower revenues collected were among the reasons Finance Minister Tharman Shanmugaratnam cited.

But in a written reply on Tuesday to a Nominated MP's question in Parliament, the minister indicated the larger than expected deficit was not a cause for worry.

'We are not seeking to reduce this deficit, either by trimming Government expenditures or raising additional revenues.'

'The larger deficit is an appropriate fiscal stance in the context of an economy that has entered a slowdown.'

'We have in fact raised expenditures over the course of the year, so as to allow for a more expansionary budget in the current economic environment.'

He added that the Government will be able to fund the larger deficit from the $6.4 billion Budget surplus accumulated in the last financial year ending March 31, this year, 'when we had unexpectedly higher revenues'.

Nominated MP Gautam Banerjee had asked the minister whether in the light of the global financial crisis, assumptions, estimates and forecasts in the Budget presented to Parliament in February this year need to be revised.

Mr Tharman said at that time, the Government's forecast of GDP growth for 2008 was 4 to 6 per cent, and inflation between 4 to 5 per cent, all in line with most market forecasts then.

These forecasts were also in line with most market forecasts then, he said.

'However, we also highlighted in the Budget the significant downside risks to growth in 2008 due to the turmoil that was ongoing in global financial markets. We also underlined the risks of higher inflation arising from the run-up in oil and food prices,' he pointed out.

'As the year progressed, these risks have in fact materialised. Growth is now likely to fall significantly below the forecast range at the start of the year. Inflation also rose to above 6 per cent in the middle of the year, although it is now falling together with the decline in commodity prices.'

'Overall, inflation should average above 6 per cent in 2008, or between 5 to 6 per cent if we exclude rental values that are imputed to owner-occupied homes, which do not reflect cash expenditures.'

The minister said the government would be revising its budget estimates for FY08, taking into account the latest available information and the most updated forecasts for the remaining five months of the fiscal year ending in March.
Labels:

0|comments

Post a Comment

Subscribe to: Post Comments (Atom)