Heng needs AI to help him in making Budget forecasts

In Economy, Political governance, Public Administration on 20/02/2018 at 9:41 am

Because if my favourite fortune-teller had made the Budget surplus prediction of S$1.91bn that Heng made in 2017, she would lose all credibility. The 2017 surplus is S$9.6bn: 5 times or 503% bigger than projected last year. This is a miss of S$7.7bn, or, as Chris K points out, nearly 1.8% of GDP.

As usual the “blame” for the whooping error is put on stamp duty. And the next PM said this is a one-off. If I recall, this has happened more than a few times already. Still a one-off?

But Heng and the rest of MoF, and the entire PAP administration are not held accountable for getting the 2017 projected surplus horribly wrong.

Yesterday morning, in Budget: Consistently flawed/ Use more from Reserves meh?, I pointed out that the previous year’s Budget surplus is always bigger than predicted because

Consistently expenditures will be found to have been overestimated, and revenues underestimated

And that this tot was triggered by FT’s description of a Japanese mgt practice

[T]he pattern is too consistent for comfort, often strays into the deliberately deceptive, and is carried out as part of a habit of systemic conservatism

Let me be clear. I am not accusing anyone in MoF or the govt of being  “deliberately deceptive”. Here in S’pore, the pattern of underestimating revenue and overestimating expenditure “is too consistent for comfort and is carried out as part of a habit of systemic conservatism”).

Chris K spotted two more whopping misses in 2017 that are likely to be repeated based on the forecasts for 2018

Land sales revenue is estimated to be 12,2b for 2018 but for 2017, land sales revenues are revised from 8.2b to 12.9b. A revenue miss of 4.7b.

Investment income pertaining to interest and dividends only is estimated at 11.5b for 2018. But for 2017, it was revised from 10.5b to 17.5b, a whopping miss of 7b. Why I say whopping? Interest and dividends from an investment portfolio are fairly predictable, what is not predictable is the change in market value of investments. But the latter is not included so why such a large miss?

In total, both land sales revenues and investment income are 23.7b estimated for 2018 and revised upwards to 30.4b for 2017.


Coming back to Heng and AI, maybe MoF should use IBM’s Watson cognitive computing innovation to help it improve its forecasting techniques.

After all in 2014,

DBS Bank and IBM today announced an agreement in which DBS will deploy IBM’s Watson cognitive computing innovation to deliver a next generation customer experience. This collaboration is part of an ongoing journey by DBS to shape the future of banking.



What about benefits comparison table too?

In Economy, Media on 20/02/2018 at 7:31 am

When I saw this bit of propoganda for the GST increase, I couldn’t help but think:

They should also put the benefits alongside the comparison of the GST rates.

Whatever, I note that HK does not impose GST.

Budget: Consistently flawed/ Use more from Reserves meh?

In Economy, Political economy, Political governance on 19/02/2018 at 10:02 am

[Update at 5.25pm: Trumpets please

My prediction that GST increase would be announced but delayed is correct: Heng announced GST increase of 2% from 7% to 9% to “fund recurring government expenses”. Increase will take place between 2021 and 2025 in a progressive manner. Handouts of GST vouchers will be made permanent once the increase is put in place.]

“Thus has it always been, thus shall it ever be”.

The FT talking about how Japanese mgt do earnings guidance

[T]he pattern is too consistent for comfort, often strays into the deliberately deceptive, and is carried out as part of a habit of systemic conservatism*

reminds me of our Budget’s forecast of expenditures and revenues in the coming year. Consistently expenditures will be found to have been overestimated, and revenues underestimated when the next Budget comes around the following year.

The result?

Economists expect bumper surplus for 2017

Part of headline from today’s ST. ST went on to gush

United Overseas Bank economist Francis Tan expects an overall surplus of $3.1 billion for FY2017, compared with the official initial estimate of $1.91 billion. UOB’s econometric model projects that the Government may see $2 billion more in revenue than expected, due mainly to higher corporate income tax receipts and stamp duties.

Mr Tan expects corporate income tax revenue to hit $14.8 billion, higher than the official estimate of $13.6 billion. If so, corporate income tax would regain its place as the largest contributor to revenue, ahead of the projected $14.11 billion net investment returns (NIR) contribution.

“Thus has it always been, thus shall it ever be” as the saying goes.

So remember that expenditures will be overestimated, and revenues understimated when we are told in the Budget statement that GST has to be raised because expenditure is rising for welfare and other goodies.


So why is there is surplus still?

Between FY2007 and FY2016, Singapore’s revenue has grown from S$43 billion to S$83 billion, based on revised FY2016 estimates. Over the same period, however, government expenditure has more than doubled from S$33 billion to S$71 billion.

Constructive, nation-building Today

And Err what about using more from income from reserves** and designating land sales as revenue, not chips for Ho Ching and GIC?)


Whatever, my bet is that there’ll be an announcement of a GST increase of 2 % but that the increase will be deferred so that Tharman’s promise will be kept

To be fair to PM Lee, both the MOF and he have clarified that consistent with DPM Tharmans 2015 remarks, we do not have to raise taxes before the end of the decade.

So there’s really no need to get our fiscal knickers into a twist about GST or income tax increases till after the next GE folks..

Countering PAP’s BS that taxes must go up


*”Earnings guidance in markets everywhere is often a victim of the management instinct to lowball first so as to triumph later with an overshoot. In Japan, though, the pattern is too consistent for comfort, often strays into the deliberately deceptive, and is carried out as part of a habit of systemic conservatism. CEOs are not financially incentivised to reach for the stars, so opt for comfortable survival meeting targets they know are achievable.”


**Long quote from

The reserve option

One other way of funding soaring spending on healthcare and social spending is to tap reserves built up over past decades. “If the government feels that, based on current revenue projections, it is not able to fund increased social spending and is looking for new sources of revenue, then its first consideration should be whether reserves should be tapped,” says Donald Low, associate dean at the Lee Kuan Yew School of Public Policy.

In a chapter in a book he co-authored, Hard Choices, published in 2014, Low argues that it is the baby boom generation — the group of people now entering or in retirement and at whom increased healthcare and social spending is targeted — that contributed the most to the accumulation of national reserves. “A significant part of our reserves is the result of fiscal surpluses generated in the 1980s and 1990s — the period when the baby boom generation was most economically productive,” he wrote. “Now that the generation that contributed the most to our reserves is entering retirement, it is only fair from an intergenerational perspective that the state reverses part of that transfer.

“To impose the fiscal burden of looking after the needs of the baby boomers onto subsequent generations in the form of higher taxes while continuing to accumulate reserves is not only unequitable but also inefficient… because continuing with a strategy of growing our reserves regardless of context implies a negative discount rate — that is, we favour the interests of a future generation more than those of the current generation… which has immediate needs.”

Singapore has, in fact, been tapping more of the investment returns of its reserves in recent years. In FY2016, Temasek Holdings was included under the so-called Net Investment Returns framework, which allows the government to spend up to 50% of its expected long-term returns. That year, NIR Contribution amounted to $14.37 billion and helped turn a $5.59 billion basic deficit to an overall surplus of $5.18 billion. The NIRC was the single largest contributor to the government coffers in both FY2016 and FY2017.

The NIR framework was implemented in 2009 to include expected long-term real returns on the government’s net assets managed by GIC and the Monetary Authority of Singapore. It was a major change from the previous Net Investment Income framework, under which the government could only spend investment income comprising dividends and interest.

Yet, should Singapore not be careful about using its reserves to fund the Budget? Should we not hold on to it for that proverbial rainy day? “But isn’t it the case that future generations are likely to be richer, for one, and, with [total fertility rate] at 1.2, the future generation is going to be a smaller generation [too]?” Low retorts. “So, we’re saving for a future generation that’s likely to be richer and almost certainly a smaller cohort than the baby boom generation. That seems like a regressive transfer of resources.”

He adds, “I think we have a social obligation to reduce inequality. In Singapore’s context, given that the baby boom generation helped to accumulate a large part of our reserves, one way of reducing inequality would be to tap the reserves to fund their needs. Another would be to introduce or increase existing wealth taxes.”

Still, other analysts do not expect the government to make more changes to the NIR framework, at least for now. “I think it’s good policy to use the good times to save up for the future,” says Wan.