The Real Singapore
Nov 15, 2013
I refer to the article “IMF says Singapore needs to narrow current account surplus” (Reuters, Nov 14).
Singapore needs to narrow its huge current account surplus
It states that “Singapore needs to narrow its huge current account surplus further and the International Monetary Fund supports the government’s plans to raise public spending on infrastructure and social services, the IMF said on Thursday.
“Singapore’s external position appears to be stronger than warranted by fundamentals, suggesting the importance of further efforts to narrow the current account surplus over the medium term”
Due to huge Budget surpluses?
Singapore, unlike many developed economies, enjoys huge current account surpluses. This is partly due to the government routinely posting budget surpluses.
The island, which has a population of just 5.4 million people, enjoyed a current account surplus of $51.4 billion last year, which was a massive 18.6 percent of gross domestic product (GDP).”
Never spend a single cent on healthcare, CPF and HDB?
The above in a sense, provides further information in relation to the issue that from a cashflow perspective, the Government does not spend a single on healthcare, CPF or HDB – building up huge Budget surpluses and reserves. Last year’s surplus was $3.9 billion in the Budget statement, or $36.1 billion according to the Department of Statistics using IMF fiscal reporting standards – and about $185 billion over the last 7 years or so.
Credit, real estate bubble?
As to “The IMF, however, warned that Singapore needed to be wary of risks arising from the rapid growth of credit and real estate prices in recent years, noting the city-state’s economy has become increasingly sensitive to macroeconomic shocks and interest rate cycles.
“Significant risks have built up under very low interest rates, but appear manageable, although confirmation will come only once the cycle has turned,” the IMF said”
HDB market subsidy pricing policy?
– the continuance of the HDB market subsidy pricing policy which essentially means that the Government does not spend a single cent on HDB, and makes huge profits from flat sales as well as lending Singaporeans’ CPF funds to flat purchasers to earn 0.1 per cent more than the 2.5 per cent paid on their ordinary accounts – which enables the HDB to sell more flats and collect more resale levies, needs to be reviewed.
Bleak outlook for real wage growth?
With regard to “The fund forecasts Singapore’s core inflation will rise from 1.9 percent this year to 2.8 percent next year, which would make it the highest since 2008.
Core inflation excludes the cost of cars and accommodation since these are more influenced by government policy”
– this may not bode well for Singaporean workers, particularly for lower-income workers, as I estimate that the real median wage growth excluding employer CPF contribution was less than 1 per cent per annum over the last decade or so. For the 20th percentile of workers, the real wage growth was close to zero.
Leong Sze Hian
