Fiscal Deficit Target Likely To Be 3.7% For FY17: DBS
The pace of fiscal tightening is likely to slow down next fiscal, with the government’s deficit target expected to be higher at 3.7 per cent of GDP, says a DBS report. The target for 2016-17, as per the earlier roadmap, was 3.5 per cent and is likely to be pushed back. According to the global financial services major, the fiscal slippage in the next financial year would be largely due to the need to accommodate higher spending commitments, especially a bigger public sector wage/pension bill and rising banks’ recapitalisation needs. “On the fiscal math, signs are that the FY15/16 fiscal deficit target will not be breached,” DBS said in a research note, adding that the “pace of fiscal tightening is likely to slow in FY16/17, with the deficit target to be adjusted higher at 3.7 per cent of GDP”. It said worries over bank capitalisation were revived after key public-sector banks reported a sharp jump in non performing loans and higher provisions in the December 2015 quarter.