Singapore’s ‘election Budget’ expected to tackle cost of living with generous handouts

AS THE last Budget before Singapore’s next general election (GE), Budget 2025 could tip towards addressing immediate challenges such as the cost of living, said political watchers.

The speech on Feb 18 may thus include generous handouts and social transfers, though the government will still address long-term challenges such as economic transformation, they added.

The next GE, to be held by Nov 23, 2025, will be the first in which Prime Minister Lawrence Wong leads the ruling People’s Action Party.

In an election year, the Budget may emphasise measures with “visible, near-term benefits”, such as cash transfers, utility rebates or job creation programmes, said Chua Kong Ping, business tax partner at Deloitte Singapore.

But that does not mean neglecting other issues. “Past election-year Budgets have introduced measures for immediate relief, but have typically reflected consistent long-term strategies,” he said.

“Ultimately, the government’s approach will likely balance addressing immediate challenges, such as inflation and economic uncertainties, with sustaining long-term growth, focusing on initiatives that provide measurable benefits in the short term.”

OCBC chief economist Selena Ling expects an “election Budget” to be characterised by its “feel-good factor”, which means “more carrots and… less focus on the stick”.

There could be “more holistic assistance” for those starting families, the sandwiched class and the elderly, she said. In contrast, wealth taxes or tax increases are “unlikely”.

The feel-good factor could be boosted by Singapore’s celebration of its 60th year of independence next year.

Budget 2025 may have “extra significance” as not just the last Budget of this term but an “SG60” one, said Ling, adding that “expectations are running high”.

As this is the last Budget for the current government term, economists see room for it to be expansionary.

Singapore’s Constitution requires the government to end each term with a balanced Budget. For the current term so far, the cumulative net fiscal position is an estimated surplus of S$1.83 billion.

This is based on surpluses of S$1.88 billion in FY2021 and S$1.72 billion in FY2022; a deficit of S$2.55 billion in FY2023; and an estimated S$0.78 billion surplus in the ongoing FY2024, based on figures provided by Second Finance Minister Chee Hong Tat in a parliamentary reply in September.

Higher-than-expected tax collection in FY2024 so far has put government finances in a “good position”, said Maybank economist Brian Lee.

For the first seven months of the fiscal year, operating revenue is up 13.5 per cent year on year, much stronger than the Ministry of Finance’s full-year projection of 4.2 per cent, he noted.

“There is still leeway to run an expansionary fiscal stance in Budget 2025, while maintaining an overall fiscal surplus shored up by higher net investment returns, a capitalisation of infrastructure spending, and a smaller quantum of fund top-ups, which are monies set aside for future use on specific objectives,” said Lee.

“Budget 2025 will likely be generous with handouts and social transfers,” he added.

But Ling noted that the structural trends of an ageing population, climate change and greater geopolitical complexities make it a growing challenge to maintain fiscal sustainability.

Cost-of-living concerns

As a “key step” in GE preparations, PM Wong may focus on “hot-button topics that concern the average voter” in Budget 2025, said Eugene Tan, associate economist at Moody’s Analytics. He and other watchers expect cost of living to top this list.

Pundits expect greater economic and geopolitical uncertainty in 2025, with US president-elect Donald Trump taking office in January. There is concern that Trump’s threatened tariffs may increase inflationary pressures again.

In a November press conference, PM Wong noted that the cost of living “remains a key concern for many”.

He outlined central themes in Budget 2025 such as training, skills and jobs, as the government aims to address job security concerns, particularly among older workers; and Singapore’s economic strategies for its next bound.

These are also themes of the Forward Singapore exercise, framed as the fourth-generation leadership’s agenda.

To relieve cost-of-living pressures, watchers expect more cash vouchers to help households with grocery and utility bills, not unlike the Community Development Council vouchers in 2024.

Chua noted that in 2015 – also an election year – a one-off SG50 Bonus was given to all civil servants, alongside enhancements to the Goods and Services Tax Voucher scheme and Medisave top-ups for households.

“There is speculation about similar initiatives, such as an SG60 Bonus, to address cost-of-living pressures while commemorating this milestone,” he said.

Maybank’s Lee sees scope to broaden income eligibility criteria for subsidies for pre-school or healthcare, so that more middle-income families qualify.

There may also be personal income tax rebates, he said, similar to those offered in Budget 2024 in view of cost-of-living concerns.

Skills and technology

To address job security, observers expect further investments in upskilling and enhancements to the SkillsFuture framework.

“The government should consider strategies to encourage workers to tap SkillsFuture funding effectively, focusing on skills that align with the evolving needs of the workplace,” said Lee Chew Chiat, government and public services industry leader at Deloitte South-east Asia.

Lawrence Loh, a professor and director at the Centre for Governance and Sustainability at the National University of Singapore Business School, believes more emphasis should be given to the “demand side” of training, rather than the “supply side”.

This means aligning courses with what employers seek and better matching newly skilled workers with companies that need them.

Companies, too, may get help to transform.

With the socioeconomic angle likely to take precedence in Budget 2025, OCBC’s Ling believes that corporates hoping for grants and cash assistance may be disappointed.

“Policymakers may want to save some dry powder to see what comes next for geopolitical and trade conflicts,” she said.

However, Prof Loh thinks businesses are unlikely to be neglected, even if Budget 2025 is people-centric.

“People need jobs, and businesses are the supplier of jobs,” he said. “So if they really want to focus on people, the businesses must do well as well.”

Deloitte’s Chua thinks “broad-based support is unlikely” but businesses can expect targeted support “that aligns with national goals, such as sustainability, digital transformation and workforce training” – as has been the trend.

Ajay Kumar Sanganeria, partner and head of tax at KPMG in Singapore, agreed that companies may get help to adopt emerging technologies, to maintain competitiveness and adaptability.

DBS economist Chua Han Teng expects smaller companies to get support for advanced digital technologies such as artificial intelligence, and building sustainability capabilities.

At the broader economic level, Maybank’s Lee expects corporate income tax rebates for both multinational corporations (MNCs) and small and medium enterprises.

This is in light of tougher competition for MNC investments amid concerns over the global minimum tax, as well as rising business costs, he said. Strong tax revenue collection should allow this move.

Back burner for now

With a focus on immediate priorities, spending on longer-term initiatives may be spaced out across future Budgets to maintain fiscal discipline, said Deloitte’s Chua.

“Large-scale projects with extended timelines – such as certain transport network expansion projects or urban redevelopment plans – could progress more gradually to prioritise resources for pressing needs,” he said.

Budget 2025 is unlikely to include moves such as further tightening of foreign manpower rules or changes to road pricing, with the government waiting until later to make such decisions, said Maybank’s Lee.

Similarly, if the property market is not overly heated, the government may wait until after the election to review and relax en-bloc rules, he said.

There is scope for allowing developers more time to complete and sell large housing projects before subjecting them to an Additional Buyer’s Stamp Duty clawback, he added.