"The government doesn't usually miss its own deadlines," said Simon Tay, with the Singapore Institute of International Affairs.

Mr Lee said the delay was necessary because of smaller tax revenues as result of Singapore's sluggish economic performance last year caused by the outbreak of severe acute respiratory syndrome. The economy grew by 1.1 per cent in 2003.

Mr Lee, the son of modern Singapore's founding father Lee Kuan Yew, is regarded as a fiscal conservative, a reputation enforced by a proposed 2 per cent cut on budget caps for all ministries except defence.

He promised to produce a balanced balance for fiscal 2005 after posting small deficits for the last three of four years. Analysts suggested that Mr Lee felt it was necessary to produce a balanced budget during his first year as prime minister.

The budget deficit for fiscal 2004, which begins April 1, is projected at S$1.35bn ($807m), up from a previous estimate of S$750m, due to tax cuts and new incentives. The fiscal 2003 budget deficit stood at S$1.8bn.

The government will be able to finance the deficit from accumulated funds instead of drawing on past reserves. The budget includes proposals to help Singapore retain its position as a regional business hub against increased competition from neighbouring countries.

The corporate tax cut to 20 per cent would help bring Singapore's rate within reach of Hong Kong's 17.5 per cent corporate tax.

Analysts said the budget sets the tone for policies that Mr Lee is likely to pursue as prime minister, including providing incentives for business to boost employment and investment while opening the economy to increased competition.

The government will introduce measures to reform the labour market, cut bureaucratic red-tape and propose a new competition law.

The measures are meant to attract more foreign investment after Singapore attracted only S$7.5bn in manufacturing last year, its poorest performance in eight years.

Efforts to bolster Singapore's role as a financial centre for wealth management included giving tax-exempt status to investment income earned by individuals from financial instruments.

Total spending for fiscal 2004 was put at S$30.4bn, an increase of S$1.6bn from the year before, against revenues of S$28.3bn.

The government this week estimated that GDP this year will expand by 3.5 per cent to 5.5 per cent, its best performance since 2000. "Our recovery is picking up. There is a palpable optimism among Singaporeans and businesses," said Mr Lee.

                                                      Home