SINGAPORE – Singapore needs to keep its economy growing so that it can make a living and take care of its people, at a time when the world is becoming more dangerous and unpredictable, Deputy Prime Minister Lawrence Wong said on Feb 28.

As he laid out the Government’s plans to achieve between 2 per cent and 3 per cent growth annually over the next decade, DPM Wong said: “The reality is that Singapore will always be a little red dot – we have no hinterland, we have no natural resources, unlike resource-rich countries like Qatar or the UAE (United Arab Emirates).

“If we falter, no one will come to our rescue.”

DPM Wong noted that the Government has quadrupled social spending over the last 20 years.

Sustaining growth is therefore the way to help Singaporeans secure a better future, he said, as he detailed how Budget 2024 builds on deliberate moves in recent decades to strengthen social support.

He was speaking at the end of three days of debate in Parliament on his $131.4 billion government spending plan that saw 61 MPs from across the aisle airing their views.

In his hour-long, round-up speech, DPM Wong said increasing value-add is how Singapore can command better prices in world markets, which in turn benefits workers here with higher wages.

He cited the example of German multinational enterprise Siemens, which came to Singapore in 1908 and grew over time from a small sales office to providing technologies across sectors such as transport, water treatment and medical diagnostics.

As businesses have options on where they want to invest or site their operations, Singapore has to maintain its competitiveness to justify the premium firms pay to be here, he said.

Key to this is productivity improvement, which the Government targets to account for 1 per cent to 2 per cent of economic growth in the coming decade.

This is an ambitious goal, given Singapore’s stage of development, and will require a continual transformation of the economy, with workers embracing new skills and technologies, said DPM Wong.

Staying attractive to high-quality investments will be essential, as such investments typically involve innovative activities that push the productivity frontier.

The remaining 1 per cent of growth has to come through increases in the workforce, he said.

With resident workforce growth slowing and insufficient to meet the demands of the economy, DPM Wong said Singapore has to stay open to foreign talent.

This includes work-permit holders, who comprise about two-thirds of the total foreign workforce, mostly doing jobs that Singaporeans do not want to do.

At the upper end, this means workers able to take on jobs in new growth areas such as the digital economy, where there is a global shortage of skilled talent.

DPM Wong said Singapore has a comprehensive system of controls to regulate the quality and number of work-pass holders across every level of the workforce.

To keep pace with wage growth here, the minimum qualifying salary for employment pass applicants will be increased, he said.

“Why are we doing all this? It is not to chase after a target. It is not to grow for the sake of growth. It is to secure better outcomes for Singapore and Singaporeans,” he added.

This is why the Government is also making several other moves in tandem, such as enacting workplace fairness laws, enhancements to SkillsFuture, and new support for segments that face more challenges, such as Institute of Technical Education graduates, he said.

Following DPM Wong’s speech, Leader of the Opposition Pritam Singh said that while growth is important, what is more key is that such growth is sustainable. He cited how the Government said about a decade ago that the country needed to slow growth down as the situation had changed dramatically.

In response, DPM Wong agreed that growth has to be sustainable. The issue then was about infrastructure, and the Government had since updated its planning processes. For instance, it has ramped up the building of public housing and worker dormitories.

Strengthening social safety nets

Over the course of the three-day Budget debate, questions were raised on whether the social support system is sufficient to assure Singaporeans through every life stage. Those who spoke on the topic included Ms Ng Ling Ling (Ang Mo Kio GRC) and Dr Wan Rizal (Jalan Besar GRC), as well as Workers’ Party MP Dennis Tan (Hougang).

In response, DPM Wong said social spending has quadrupled over the last 20 years, and the Government is also spending more on social support as a share of the whole Budget.

In Budget 2024, half the total expenditure across all government ministries is committed to social spending, with a substantial portion of this being structural schemes rather than temporary measures, he said.

He noted that some MPs urged the Government to do more, while others stressed the need to proceed carefully to avoid breeding a sense of entitlement and dependency among Singaporeans or undermining individual responsibility.

DPM Wong said the Government is careful about getting this balance right. “We have not changed our ethos of social support – it is not just about giving handouts, but it is about giving people a leg up.”

In response to Progress Singapore Party Non-Constituency MP Leong Mun Wai, who urged the Government to employ more permanent schemes rather than temporary handouts, DPM Wong said the Government does not see this as one or the other, and employs both. This was particularly the case in the past two years, as inflation was higher and temporary relief measures were necessary.

He pointed out that poorly designed permanent schemes will breed dependencies permanently.

On structural schemes which are not temporary, DPM Wong said: “We continue to fine-tune them to make sure that they are designed well so that we are providing all the support and assurance we need while also upholding our key ethos of individual responsibility and self-reliance, and avoiding dependency and entitlement.”

In his round-up speech, DPM Wong noted that the new ComLink+ scheme and SkillsFuture Level-Up Programme have been designed to not erode personal and family responsibilities. Likewise, the upcoming temporary support scheme for workers who are involuntarily unemployed will also abide by these principles.

“We catch Singaporeans when they fall, and we make sure they do not fall behind. We invest in them, and we provide them the support to bounce back from life’s setbacks, and do even better for themselves,” he said.

DPM Wong added that these schemes are ultimately about ensuring that families and individuals enjoy better incomes and living standards.

He noted that over the past decade, lower-income groups in Singapore have progressed faster than other groups. The real incomes of the bottom 20 per cent have increased slightly faster than the middle income and twice as fast as the top 20 per cent.

“This is based on incomes alone. It has not taken into consideration our progressive system of taxes and benefits, which favours the lower-income,” said DPM Wong, noting the overall picture is better for the lower-income and that the Government will continue to improve its policies.

Support amid inflation

DPM Wong pointed out that the reasons for high inflation in Singapore over the last two years are not unique to the country.

For more than a decade before the Covid-19 pandemic, global inflation was generally stable at about 4 per cent per annum.

During this time, Singapore enjoyed relatively stable inflation and in most years, this was lower than global inflation, he noted.

But in 2021 and early 2022, strong demand and constrained supply due to pandemic-related restrictions and the Russia-Ukraine war resulted in a surge in prices, driving inflation everywhere.

Tightened monetary policy in Singapore helped ensure that inflation did not reach the peaks seen in several parts of the world, said DPM Wong.

Some MPs, including Ms Ng and Mr Faisal Manap (Aljunied GRC), highlighted other specific cost items such as housing and transport, to which DPM Wong said affordability has improved in relation to real income.

Acknowledging that there tends to be a gap between economic data and perceptions of consumers, he said the Government takes feedback on the ground seriously, but also examines data closely to better shape policy responses.

This is why support packages have been extended over the last two years to cushion the impact of inflation, particularly for low- and middle-income Singaporeans, added DPM Wong.

While inflation is moderating in 2024, the Government recognises that prices are still high, and that there are continued pressures for families and individuals. This is why the Assurance Package has been enhanced.

He said: “We have designed and sized the support of the enhancements carefully. There is something for everyone, regardless of age, property type or income. But we also don’t want to inadvertently stimulate demand too much and push up prices... So, the support is targeted and tilted towards those with less.”

DPM Wong also reiterated how support measures in Budget 2024 will fully cover the increase in spending due to inflation for lower-income households in 2024, and will substantially cover the increase for middle-income households.

For businesses, he said the Government has pledged to help them with rising costs through the Enterprise Support Package, which he called the most generous corporate income tax rebate extended to date.

All eligible firms, including those that are not profitable, will be provided with a cash grant which can be used to defray cost increases in wages, rentals, utilities or transport.

“I understand that some groups will feel that the help extended is still not enough. But I hope everyone can appreciate the bigger picture. We are going through a rough patch of higher prices due to forces well beyond our control,” DPM Wong said, noting the Government will do all it can to help households and businesses through this rough patch.

WP MP Jamus Lim (Sengkang GRC) asked if DPM Wong still believed that the timing of the increase in goods and services tax (GST) was justified, given that it would likely have contributed to domestic inflation.

DPM Wong said the impact of the GST increase is “once-off” and not permanent. It is not the key driver behind Singapore’s inflation spike, he said.

He added that there are schemes in place to defer the impact of the tax increase, especially for low-income groups.

The GST increase was also necessary to fund rising expenditure, he said. “Our approach is let’s do it correctly, let’s do it in good time... Make sure that our fiscal system remains sound and always ensure that we have sufficient revenues to cover our spending.”