Budget 2025: Singapore expects S$6.8 billion surplus in FY2025, contrary to economists’ deficit predictions
This is thanks partly to a 12.9% rise in the net investment returns contribution to S$27.1 billion
- Higher net investment returns contribution creates an overall surplus, despite basic deficit
- Basic deficit of S$4.8 billion reflects expansionary stance
SINGAPORE expects a fiscal surplus of S$6.8 billion, or 0.9 per cent of gross domestic product for the 2025 financial year, despite a generous spending plan under which the government’s total expenditure will exceed operating revenue.
This is thanks partly to a 12.9 per cent rise in the net investment returns contribution (NIRC) to S$27.1 billion.
The surplus comes contrary to economists’ expectations of a deficit for this final Budget of the government term, ahead of the next general election to be held by November.
Maybank economist Chua Hak Bin said the surplus leaves “some dry powder” that can be tapped later in the financial year, if needed, should the economy go “astray in a more uncertain world”.
The government could also draw upon some of this surplus for National Day celebrations, given that it is the Republic’s 60th birthday, he added.
This is the second planned surplus after FY2024’s S$778 million estimate, which has now been revised upwards to S$6.4 billion. Two of the last three planned deficits – in FY2021 and FY2022 – also ended up being surpluses instead.
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Higher takings
Operating revenue for FY2025 is expected to be S$122.8 billion, 5.3 per cent higher than FY2024’s revised S$116.6 billion in takings.
The greatest driver is corporate income tax, with an estimated S$32.7 billion in takings. This is up S$1.8 billion or 5.8 per cent from the revised FY2024 figure.
Other major drivers are personal income tax, goods and services tax, as well as customs, excise and carbon taxes.
On a percentage basis, the largest rises were for customs, excise and carbon taxes – up 17.1 per cent to S$4 billion – as well as the category of other taxes, up 11.5 per cent to S$10.2 billion.
These other taxes comprise foreign worker levies, water conservation tax, land betterment charges and annual tonnage tax.
Higher spending
However, operating revenue is outstripped by total expenditure, which is expected to be S$123.8 billion or 16.2 per cent of gross domestic product. This is 9.6 per cent higher than FY2024’s revised S$112.9 billion figure.
The largest driver of this rise is healthcare spending, set to form 16.9 per cent of total ministry expenditure at S$20.9 billion – up S$2.9 billion or 16.3 per cent from the previous year.
This is on the back of increased subventions to public healthcare institutions, higher operating costs and the construction of major healthcare facilities.
The second-highest rise is for the Ministry of Defence, which continues to have the biggest ministry budget at S$23.4 billion, up S$2.6 billion or 12.4 per cent from FY2024. This is mainly due to the acceleration of critical projects and faster progress for construction projects and the NS Square at Marina Bay.
The Ministry of Trade and Industry’s budget is expected to rise S$1.2 billion or 19.9 per cent to S$7.2 billion, driven by higher requirements for Enterprise Singapore’s Enterprise Development Fund.
In contrast, spending is set to fall for the Ministry of National Development. Its budget is S$9.3 billion, down 7.5 per cent from S$10.1 billion. This is due to lower operating public housing grants and lower requirements for upgrading programmes and infrastructure provisions in public housing towns.
The difference between operating revenue and total expenditure yields a primary deficit of S$1 billion. After special transfers, this widens to a basic deficit of S$4.8 billion, reflecting an expansionary stance.
S&P Global Market Intelligence expects Budget 2025 to boost GDP growth to 2.6 per cent in real terms. For instance, it should spur domestic demand, as households receive up to S$800 in Community Development Council vouchers and 60 per cent personal income tax rebates, capped at S$200.
The basic deficit, however, turns into an overall budget surplus of S$2.7 billion after accounting for the S$27.1 billion NIRC – capped at half the long-term returns from Singapore’s invested reserves – and top-ups to endowment and trust funds.
OCBC chief economist Selena Ling said the NIRC increase of over S$3 billion was a surprise and may not be sustainable over the medium term. “Also, working backwards, I suspect they may have factored in some upside on the growth front too.”
After accounting for capitalisation of significant infrastructure, as well as related interest costs and loan expenses, the overall fiscal surplus is estimated at S$6.8 billion.
This surplus is in sharp contrast to the “stimulative” deficit that economists had expected, given the fiscal room created by a surplus in FY2024. Singapore’s government must maintain a balanced Budget over its entire term, with the current term ending in FY2025.
DBS economist Chua Han Teng said this year’s surplus reflects Singapore’s strong fiscal position and “adherence to its long-held principle of fiscal prudence”.
He noted that for the term of FY2021 to FY2025, the overall surplus is set to be around S$14.3 billion – “a respectable achievement, considering the tumultuous period that Singapore’s economy has been through during these years”.
For more Budget stories, visit businesstimes.com.sg/singapore-budget-2025
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