‘No apology for pursuing growth’: Singapore’s 2024 budget doubles down on pro-growth policies, expands social support

Characterised by many pundits as the “Forward Singapore” budget – named after a nationwide feedback exercise led by Wong – the S$131.4 billion (US$97.6 billion) spending plan is meant to reflect the emerging societal consensus for the country’s future direction under the ruling party’s next generation of Singapore leaders.

Wong, now the city-state’s deputy prime minister and finance minister, reiterated the importance of sustained economic growth, in response to what he said were suggestions over the past few years that “Singapore should slow down” and not grow as quickly as it previously has. 

He also announced the setting up of a new “Future Energy Fund” with an initial S$5 billion (US$3.7 billion) commitment, to support private sector efforts in building clean power infrastructure, in anticipation of future investment needs. 

The republic’s gross domestic product (GDP) grew by 1.1 per cent last year, a significant slowdown compared to 2022, which saw a GDP growth rate of 3.6 per cent. In his budget statement, Wong signalled the government’s intention to push for 2 to 3 per cent economic growth over the next decade.

“If we were to experience similarly slow growth for several years in a row, we will be in trouble. We will have no chance of improving our collective well-being,” Wong said, noting that growth is the prerequisite to create better jobs and raise living standards for all Singaporeans.

“Singaporeans’ living standards will be dented. We will not be able to afford the social services we need, and in the end, workers and families will be hit the hardest,” he added. 

This could likely be Wong’s last budget speech, giving it added political significance. Singapore Prime Minister Lee Hsien Loong is expected to hand over leadership to Wong before November this year, and the country’s next general election is due by 2025. 

Wong’s budget included funding for areas such as improving Singapore’s broadband telecommunications network to be 10 times faster in a few years, and S$1 billion for developing the country’s artificial intelligence capabilities. Recommendations from the “Forward Singapore” feedback exercise have been considered for the latest round of spending, emphasised Wong.  

Billions more will go into education and worker training initiatives, along with tax rebates and payouts to help residents deal with rising costs and the decline in real income last year. The government will co-fund the increase in salaries of lower-wage workers, which will raise the wages of full-time workers from S$1,400 (US$1,037) to S$1,600 (US$1,185) and the minimum hourly rate of part-time workers.

Pro-growth policies still favoured

There has been a growing movement in recent years among Western countries to examine the impacts and rationale for continued economic growth. The idea is most strongly captured in the term “degrowth”, which pushes back against the assumption that relentless economic growth is necessary for societal progress.

Such talk remains largely on the sidelines in Singapore, but louder voices have emerged as the country grapples with balancing development, social mobility and cutting carbon emissions.

The country’s national broadsheets, The Straits Times and Business Times, have also featured commentaries on degrowth. “Can degrowth save us from destruction?” read the headline of a 2022 op-ed by a Business Times journalist. “‘Degrowth’ economics may be inevitable“, stated another article reposted on the Straits Times last August, though the commentary was not specific to the city-state.

“We cannot escape the reality that economic growth is carbon-intensive”, said Professor Lawrence Loh from the National University of Singapore. However, Loh remarked that “it is a pity we often push for degrowth purely on the environmental angle at the expense of social development for human welfare”. 

Isaac Neo, a SG Climate Rally representative, said that he was heartened that Singapore is “not going for growth at all costs”, but urged the government to focus on fair growth and redistribution of wealth, rather than growing for growth’s sake.

“The issue is wealth inequality, or simply put - who is this growth for? If the result of increased growth is that the divide between the wealthy and the rest increases, societal well-being does not necessarily increase, as the wealthy push up prices for the rest of us,” Neo told Eco-Business.

“Therefore, what we are advocating for is not degrowth, but prioritising policies for greater collective societal wellbeing over growth.”

Part of the budget will go into growing the country’s green economy. A S$2 billion (US$1.48 billion) top-up to Singapore’s national productivity fund is part of its effort to woo “high quality and high value investments” into manufacturing and research that support the transition away from carbon-intensive activities. 

This will be done through a Refundable Investment Credit (RIC) scheme, which has been welcomed by the Big Four accounting firms. It is aimed at boosting Singapore’s attractiveness to multinationals as a new global minimum corporate tax rate of 15 per cent is introduced. More than 130 countries – including the city-state – have agreed to the adjustment.

Yvaine Gan, global investment and innovation incentives leader at Deloitte Singapore, said that she was “encouraged” to see that the government has incorporated industry feedback with the new RIC tool, which allows flexibility to support a wide range of activities, including green transition plans. 

But with many activities potentially competing for funding, the scheme should prioritise those with most decarbonisation potential, such as sustainability innovations as well as services to support supply chain due diligence, responsible sourcing and sustainability reporting, said Gan. 

With other countries like the United States offering attractive investment credits for energy transition projects, RIC improves Singapore’s competitiveness for sustainability investments from multinational corporations, said Irene Tai, PwC Singapore’s energy, utilities and resources resources, transport and logistics tax leader.

Under the scheme, these credits can be used to offset a company’s income tax. Leftover credits will be refunded in cash to the firm within four years upon qualifying for the scheme.

But Neo from SG Climate Rally called for greater transparency into how these credits will support green transition activities, such as how much emissions the financed initiative helps businesses to save every year. 

“If the investment leads to increased emissions from new manufacturing facilities that offset the initiatives supporting the green transition, then there is no net benefit overall for our journey to reducing emissions,” Neo said.

Another S$2 billion (US$1.48 billion) has been set aside to build capabilities in fintech as well as green and transition investing in the financial services sector. “As more blended finance and impact capital organisations look for a home, Singapore’s conducive ecosystem supported by this fund can help attract capital and talent to be based out of Singapore,” said Sharad Somani of professional services firm KPMG Singapore, another Big Four accounting firm. Somani is partner and head of KPMG ESG.

Local small and medium-sized enterprises will also get more support in securing green loans. More details about this and other sustainability-related measures are expected at the upcoming parliamentary debates around the Ministry of Trade and Industry’s planned expenditures.

New energy funding

At Budget 2024, Singapore’s finance minister Wong also highlighted how moving the city-state to cleaner energy sources is an “emerging security challenge”, given its geographical disadvantage with popular renewable options such as wind and large solar farms.

For now, no further details have been provided on funding periods and focus areas of the newly-announced S$5 billion (US$3.7 billion) Future Energy Fund. 

Singapore’s energy transition will be costly, Wong said, pointing to the need for new submarine power cables for clean electricity imports, and power generation facilities if the country scales up its use of hydrogen fuel. Singapore currently almost exclusively uses natural gas for power generation.

The country is looking at bringing in electricity from solar farms in Indonesia and Cambodia, along with wind farms in Vietnam – projects that could necessitate building thousands of kilometres of subsea power lines. Meanwhile, hydrogen is notoriously leaky and usually requires substantial infrastructure upgrades beyond a small amount of mixing with natural gas.

Wong also noted Singapore’s studies into geothermal power, but said its viability “remains to be seen” given the need for deep drilling underground. He reiterated Singapore’s stance of not ruling out nuclear power, especially with the advent of smaller, safer reactors.

“There is considerable uncertainty as to how all these energy pathways will work out. What is clear, however, is that significant effort and costs will be needed to transit from a system powered almost entirely by natural gas today to one powered largely by clean energy,” Wong said.

Dr David Broadstock, senior research fellow at National University of Singapore’s Sustainable and Green Finance Institute, said the energy fund is a “serious set of money” that has been pledged while Singapore works out its realistic clean energy pathways.

“The importance of this fund comes in the open commitment by the government to back necessary energy investments that may not otherwise occur if left to the private sector to achieve,” he said, noting that the fund is pitched as complementing, not displacing, private investment.

Nuclear energy, if given the green light in the future, could be a beneficiary of the fund, Broadstock said, given such projects could come with higher reputational and financial risk, and thus require blended financing to be viable.

SG Climate Rally’s Neo said the group hopes part of the fund will be used to transition away from all fossil fuels, including natural gas. This includes retraining petrochemical and gas workers for cleaner energy sectors, he said.

Meanwhile, Singapore businesses are also getting more support in adopting energy efficiency measures. A 2022 grant to cover equipment upgrades in the food, manufacturing and retail sectors has been extended to businesses in manufacturing, construction, marine and data centres.