Govt to review 'size, components' of GST support package due to higher than expected inflation: Lawrence Wong

SINGAPORE — The Government will review the "sizing and components" of the Assurance Package, which comprises cash payouts to help Singaporeans deal with the impending Goods and Services Tax (GST) hike, to account for the higher than expected inflation, Deputy Prime Minister Lawrence Wong said on Friday (Oct 14). 

"The Government is fully committed to cushion the impact of the GST increase for all Singaporeans," said Mr Wong, who was speaking to reporters at a press conference announcing a fresh S$1.5 billion support package for Singaporeans.

"And to keep to this commitment, we will review the sizing and components of the Assurance Package to account for the higher than expected inflation, and I will provide more details on this at Budget next year." 

Under the Assurance Package, all Singaporeans aged 21 and above will receive cash payouts of up to S$1,600, which will be distributed from December this year over the next five years. 

For lower-income households, they will receive much more — with offsets covering about 10 years’ worth of additional GST expense.

This is to offset a two-step hike in the GST, starting with an increase from 7 per cent to 8 per cent with effect from January next year, and a subsequent increase to 9 per cent from January 2024.

Mr Wong, who is also Finance Minister, was asked by the media if there would be perceptions that these stop-gap measures to offset the GST increase would be akin to "kicking the can down the road". 

He said that the uncertain inflationary environment now means that it has become "very hard" for the Government to time its revenue raising measures. 

"A more responsible approach would be to proceed with the GST increase, so that we can secure the revenues we need for our growing expenditure needs, but make sure that we offset the impact, especially for the low and middle income Singaporeans," he said. 

"And by proceeding in this manner, what it means is that higher income Singaporeans, the foreigners who are here, the tourists who are here, will be paying the additional GST increase and helping us to provide the revenues we need." 

LATEST PACKAGE DESIGNED TO AVOID SPIRALLING INFLATION

A member of the media also asked if the support packages announced on Friday could inadvertently contribute to more inflation, as households could now have more spending power to drive up demand. 

Mr Wong said that worsening inflation as a result of the measures should not occur, as the package was designed specifically to help the lower and middle income groups. 

"It's not a broad package where we are giving the same amount of money to every Singaporean, which can indeed run the risk of having too much stimulus... and create more inflationary pressure inadvertently.

"We have not done that, we have designed the package with targeted support so that more will be provided for the lower income and the retirees, who will be disproportionately affected by inflation in the first place," he said.

"By designing the package this way, we will be able to minimise the risk of this additional demand inadvertently bringing about more inflation." 

GOVERNMENT MONITORING RECESSION RISK CLOSELY 

TODAY asked Mr Wong whether there could be a risk of a recession in the near future, given that inflation is expected to stay elevated well into 2023. 

Mr Wong said that the Singapore economy is still expected to see growth for both this year and next year. 

He said that Singapore's economy is expected to grow at about 3 to 4 per cent this year, which is "slightly above trend for growth potential".

"But there are, obviously, some indications of slowing growth momentum globally, which will impact Singapore, which is why next year's forecast is more subdued, but we still are forecasting growth for 2023 as of now," he said. 

Nevertheless, the Government will continue to monitor the global economic situation, particularly in the European Union, United States and China, which are the "three main growth engines that will have an impact on our local economy". 

"So where growth is concerned, if there are indications that growth outlook will start to weaken further (or) indications of more disruptions to come which will impact on growth momentum both externally and in Singapore, and even the risk of recession going up, then obviously we have a different set of 'drawer' plans," said Mr Wong. 

These "drawer" plans will concern jobs, unemployment and what can be done to stave off the risk of recession.