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Citigroup
says Singapore "fairy tale" reaches end
Lee
J. Miller
Bloomberg
19 Feb
08
http://www.bloomberg.com/apps/news...
Singapore's
budget targets lower- and middle-income households - and
disappoints on income tax - as the government grapples with
rising prices and the U.S. economy slows, Citigroup Inc. said in
a report.
"The fairy tale economy of high growth and
low inflation of the past two years has come to an end,'' Kit Wei
Zheng, chief economist for Singapore and Malaysia, wrote in the
report today.
The chart of the day shows Singapore's
economic growth (in red) against the cost of food (in white).
Gross domestic product in the October-December period contracted
for the first time in 18 quarters. The city-state of 4.6 million
people imports about 90 percent of its food, according to the
government.
The budget also provides "massive
increases'' in spending on subway and road projects, helping
construction companies, the report said. A "key
disappointment was the lack of a cut in personal income taxes,''
with a one-time 20 percent tax rebate, the report said.
Still,
the government will provide "generous handouts,'' including
rebates, payments to the national pension fund, and subsidies for
adult education.
Singapore's Finance Ministry unveiled
the estimated S$37.5 billion ($26.6 billion) budget on Feb. 15.
The day before, the growth forecast was lowered by half a
percentage point, to a range of 4 percent to 6 percent for 2008.
The outlook for inflation was raised by a full point, to between
4.5 percent and 5.5 percent. The government singled out higher
costs as a concern.
"There was still a little of
something for everyone,'' the Citigroup report said. "Perhaps
more could have been done to help businesses to deal with rising
costs.''
Much of the increased spending for businesses
was in the form of tax incentives on research and development
investment in Singapore, the report said. The budget is "fairly
generous and expansionary.'' Singapore will boost spending 12.5
percent in the financial year starting April 1.
To
contact the reporter on this story: Lee J. Miller in Bangkok at:
lmiller@bloomberg.net
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