INTER-GENERATIONAL IMPACTS OF SINGAPORE’S BUDGETARY RESPONSES TO COVID-19: GENERATIONAL ACCOUNTING FRAMEWORK

Abstract

Singapore’s rapidly aging population poses significant challenges to the government’s long-term fiscal sustainability as it structurally affects government revenue and expenditure. Amidst the demographic trends, total government spending has skyrocketed to unprecedented amounts in 2020 in response to the COVID-19 pandemic. This paper evaluates Singapore’s fiscal sustainability and intergenerational fiscal impacts through the lens of generational accounting and actuarial analyses, before and after COVID-19. Our model predicts a pre-COVID absolute intergenerational gap of S$512 thousand between future generations and current newborns, implying that there is considerable intergenerational inequity. This gap increases by a further S$67 thousand after factoring in COVID-19’s impact on government net spending and short-term fertility rates. Fiscal balance can be restored in the short term and intergenerational equity in the long term, after incorporating key policy changes such as Goods and Services Tax (GST) hike and carbon tax increases.