Singapore Budget Deficit to Be Larger Than Forecast

By Jean Chua

Nov. 18 (Bloomberg) -- Singapore says its fiscal 2008 budget deficit may be more than three times the S$800 million ($524 million) initially forecast as it boosts spending to lift the birth rate and help consumers cope with inflation.

Government revenue will be constrained by the economic slowdown and falling property transactions, especially in the final two quarters of the fiscal year ending March 31, Finance Minister Tharman Shanmugaratnam said in written comments to parliament today. Construction costs have increased, he said.

``We are not seeking to reduce this deficit, either by trimming government expenditures or raising additional revenue,'' Shanmugaratnam said in the comments sent by e-mail. ``The larger deficit is an appropriate fiscal stance in the context of an economy that has entered a slowdown.''

Singapore's economy fell into its first recession since 2002 last quarter and the central bank last month warned of the likelihood of ``further slippage'' in growth as a global slowdown threatens manufacturing, consumer spending and tourism. Inflation is expected to be more than 6 percent this year, the government said today.

The city state, which in February reported its biggest budget surplus in at least a decade, said then it planned to give back S$5.4 billion to help consumers cope with rising food and energy prices, or about 80 percent of the S$6.4 billion surplus in the year ended March 31, 2008.

The government said in August it would spend an additional S$250 million to increase cash payouts and utility rebates to citizens. Prime Minister Lee Hsien Loong also said the government will spend S$700 million a year on benefits including extending paid maternity leave for new mothers and subsidizing in-vitro fertilization as the city state battles a declining birth rate.

The government will be able to fund this year's larger deficit from the surpluses it accumulated in fiscal year 2007, when it had ``unexpectedly higher revenues,'' Shanmugaratnam said today.

To contact the reporter on this story: Jean Chua in Singapore at jchua4@bloomberg.net.