Prime Minister and Finance Minister Lawrence Wong will deliver Singapore’s Budget 2025 on Feb 18. As a general election must be called before November, Budget 2025 is the last budget for this term of government, which requires a balanced budget by constitution, says HSBC Global Research.
Singapore has ample fiscal room to provide more policy support to tackle rising costs of living and create jobs, say Asean economist Yun Liu and research associate Madhurima Nag.
In a Feb 13 note, Liu and Nag say they expect to see “some near-term relief measures”, like Budget 2024, though these will “remain targeted in nature”.
From Budget 2024, “the only benefits for all citizens” were $600 in Community Development Council (CDC) vouchers for daily essentials, say the analysts, which were disbursed in June 2024 and in January this year.
The rest was targeted support for lower- and middle-income households, they add. These came in the form of more cash handouts, one-off U-Save rebates and Service and Conservancy Charges (S&CC) rebates for eligible HDB residents.
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A large part of the measures was announced in the Assurance Package, which reached $12.3 billion, or 1.7% of 2024 GDP.
Budget 2025 is likely to include an additional enhancement to the package in similar forms, says HSBC. “Given the fiscal leeway, we expect this to be $2 billion to $2.5 billion in 2025, higher than that in 2024.”
Singapore’s potential
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In addition to short-term reliefs, Liu and Nag expect the majority share of the spending to be channelled to areas that continue unlocking Singapore’s “medium-to-long-term potential”.
They expect the government to continue ramping up support in areas like job creation, human capital upskilling, digitalisation, R&D, green transition and artificial intelligence (AI) adoption.
Hence, HSBC expects additional top-ups in SkillsFuture Credits, similar to Budget 2024, aiming to upskill the local workforce.
They also expect additional top-ups in funds like ElderCare and Medical Endowment (MediFund). “One of Singapore’s long-term priorities is to address the issue of an ageing population. This is also part of the reason for the GST hike, as a response to potential rising healthcare spending,” say the analysts.
In addition, more financial support on childcare and parental leave entitlements could also be announced for families, after recent debates in Parliament, says HSBC.
Singapore plans to spend almost $7 billion on marriage and parenthood initiatives in 2026, a 75% rally from 2020. Minister in the Prime Minister’s Office Indranee Rajah cited this figure in Parliament on Feb 5, saying this figure is on top of government subsidies in areas like education and housing.
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‘Ample’ fiscal ammo
On the revenue side, HSBC expects a pause in introducing major tax changes in Budget 2025.
Since 2022, the government has been beefing up its coffers, given a 2 percentage point GST hike and various tax tweaks. Total revenue, 90% of which came from tax streams, surged from mid-13% of GDP to over 15%.
Singapore has ample fiscal ammunition, thanks to outperformance in previous years. For the 2023 outturns, the overall fiscal deficit turned out to be $2.9 billion, or 0.4% of GDP. This is $0.7 billion less than anticipated in Budget 2024.
HSBC expects the government to reach “a much better budget position than originally planned” for FY2024.
Total operating revenue is likely to “well overshoot” the budgeted target, given a 12% y-o-y jump in tax revenues in the first three quarters of FY2024.
This is likely led by outperformance in GST (25% higher y-o-y), personal income (9%) and corporate income taxes (6%), thanks to the stronger-than-expected economic print, says HSBC.
Assuming steady expenditure, special transfers spending and Net Investment Returns Contribution (NIRC) as budgeted for FY2024, HSBC expects to see a primary surplus of $4.9 billion (0.7% of GDP), as opposed to a budgeted deficit of $3.1 billion (0.4% of GDP). Therefore, this would make for a much larger overall surplus of around $8.8 billion (1.2% of GDP).
This means the accumulated fiscal surplus over FY2021-2024 is likely to be boosted to $9.5 billion, says HSBC, providing the basis for a “generous” budget in FY2025. “While theoretically the surplus can be all spent in FY2025, we do not believe this is the case given Singapore’s prudent position. Indeed, this is the case historically as well. We forecast an overall fiscal deficit of $5.7 billion in FY2025, with the surplus over the past five years going into reserves for future needs.”
Apart from fiscal policy, HSBC expects the Monetary Authority of Singapore (MAS) to remain on pause for the remainder of 2025. “However, if downside risks to growth were to intensify given the tariff uncertainty, we do not rule out the possibility of further monetary easing this year, likely in 2H2025.”
They add: “After all, MAS’s tone has shifted to sounding clearly dovish.”
Charts: HSBC
