Singapore is gearing up for its first budget under Prime Minister Lawrence Wong, and analysts are expecting more support for both households and businesses.
Wong, who took the helm from Lee Hsien Loong in May last year, will deliver the budget on Feb. 18. The country is due for a general election by November.
In a video posted on his YouTube channel on Tuesday, Wong said this year’s Budget will “tackle immediate concerns that all of you have raised about cost pressures, and also tackle longer-term challenges to ensure that Singapore can move forward and stay ahead in this troubled world.”
In a Feb. 4 note, analysts from Maybank noted that as Singapore’s celebrates its 60th year of independence, the government is likely to roll out a generous “SG60 budget.”
Household and business support
The Maybank analysts said such a budget will likely include a package of support measures for households to defray living costs, such as cash, consumption vouchers and rebates on utility bills, as well as more opportunities for workers to improve their skills through courses.
Bank of America analysts predict the upcoming budget will be a “feel-good” one, saying they expect measures “aimed at alleviating the cost of living pressures to form the centrepiece of Budget 2025. A new ‘Package’ to support middle-aged and middle-income groups may be possible, given signals in the New Year Day Message.”
In his New Year’s Day message, Wong said, “We will provide more targeted help to those who find it harder to cope, especially older people and lower-income groups. But we will not neglect other segments, including the middle-income and middle-aged, who are caring for both elderly parents and young children.”
On the business front, Maybank wrote, there could be more rebates for corporate tax, as well as rebates on property tax for commercial properties.
More enhancements to existing schemes to help companies may also be on the table, such as grants to relieve manpower costs.
The Maybank analysts also noted that they do not expect any more property cooling measures or wealth taxes, noting that “significant hikes” to property and income taxes were implemented in 2022 and 2023.
“The government will probably wait to see whether the increase in housing supply in the coming years will cool prices,” Maybank said.
Macroeconomic outlook
On the macroeconomic front, the BofA analysts said the budget is expected to be a “pro-growth” budget, given the “low and stable” inflation and uncertain global outlook.
The Monetary Authority of Singapore lowered its 2025 core inflation forecast range to 1%-2% from 1.5-2.5% after the sharp decline to 1.9% in the fourth quarter (from 2.7% in the third quarter), citing a return to low and stable underlying price pressures.
Nomura analysts said in an outlook note that “With inflation pressures now well contained, we think MAS is shifting its focus towards the growth outlook, which it sees as facing rising downside risks due to escalating trade policy frictions.”
Nomura forecasts a 2025 gross domestic product growth of 2.8% year on year, lower than the 4% seen in 2024, but near the top end of the government’s forecast of 1%-3%.
They attributed the expected decline to weaker external demand under Trump’s second term, despite Singapore’s free trade agreement with the United States.
“That said, we think growth will remain resilient and above potential, as strong local wage and employment growth provide some cushion against shocks from increased trade protectionism,” the analysts wrote.
Singapore’s GDP expanded by 4.4% in 2024, marking its fastest full-year growth since 2021, according to the ministry of trade and industry.
Balanced budget rule
BofA noted that Singapore has “fiscal flexibility” from accumulated surpluses from 2021 to 2024, creating room for supplementary spending.
Maybank expects the 2025 budget to register a deficit of 6 billion Singapore dollars, or about 0.8% of GDP, “as the government draws down most of its accumulated SG$6.7 billion surplus over the electoral term.” The SG$6.7 billion figure is according to Maybank estimates.
Under the Singapore Constitution, a government must maintain a balanced budget in each term of government, and can tap past reserves only with presidential approval. The government is not allowed to borrow to fund its operating expenses.
Since independence, Singapore has tapped its past reserves only twice: during the 2008 financial crisis and the Covid-19 pandemic.
The budget will also be the last for the current government before elections must be called by November.
Last month, Singapore announced the formation of its Electoral Boundaries Review Committee, a key step in the lead-up to a general election in the city-state.
Source: CNBC