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- Singapore’s Budget 2025 will address near-term cost challenges and Forward Singapore initiatives.
- Fiscal flexibility in FY2025 stems from recent budgetary outperformance.
- We expect an overall fiscal deficit of SGD3.8bn (0.5% of GDP) in FY2025.
- Measures will look to cushion households’ cost of living pressures and support families.
- Initiatives will aim at sharpening long-term economic competitiveness.
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Budget 2025, to be announced on February 18, will likely focus on the dual priorities of addressing near-term cost challenges, and rolling out further initiatives under Forward Singapore (Forward SG) to refresh the social compact and position Singapore’s economy to thrive amid global uncertainty.
Increasingly volatile and uncertain world
Singapore will be navigating an increasingly volatile and uncertain world. As detailed in Singapore’s Dynamic Outlook in 2025, we expect Singapore’s economic expansion to be buoyant at 2.8% in 2025, in line with our estimated medium-term potential rate of 2-3%, but with considerable downside uncertainties.
Global economic policy uncertainty especially on trade will be elevated in 2025 and in the coming years. A more protectionist global trade landscape from higher tariffs led by Trump’s US government poses medium-term challenges and downside risks to highly trade dependent economies like Singapore. Other geopolitical tensions from regional conflicts, technological disruptions, and climate change also exacerbate global volatility, and not forgetting binding domestic constraints such as land and labour.
At least global inflation and in price taker Singapore will ease further in 2025. We forecast Singapore’s headline inflation to return to the pre-pandemic 2010-2019 average of 1.7% in 2025. However, past price increases have resulted in higher global and domestic costs in the post-pandemic era, placing pressures on households and businesses.
Room for fiscal support in Budget 2025
We see the Singapore government having some fiscal room to provide support in Budget 2025, and expect an overall fiscal deficit of SGD3.8bn (0.5% of GDP) for FY2025.
Singapore’s long-standing commitment to prudent public finances, and better-than-expect budgetary performance in recent years provide some near-term fiscal flexibility in the final budget under the current term of government. The external uncertainties could also prompt a counter-cyclical fiscal stance.
The overall fiscal position in FY2021 and FY2022 surprised with surpluses instead of initially budgeted deficits, as public finances benefitted from a strong post-pandemic economic recovery. We also see potential for a positive surprise to the slight overall fiscal surplus that was initially budgeted for FY2024, given the economic growth rebound. We estimate that the cumulative overall fiscal surplus from FY2021 to FY2024 could therefore exceed SGD1.8bn, registering at SGD6.6bn, implying greater fiscal ammunition for FY2025.
Cushioning cost of living pressures and supporting families
Budget 2025 will likely continue efforts to mitigate Singaporeans’ near-term cost of living concerns and support families to refresh the social compact. Singapore’s government has committed to more targeted support to alleviate households’ cost of living pressures. The nation is also commemorating its 60th year of independence (SG60) in 2025. Families are likely to be a focus in Budget 2025, as part of efforts to renew the social compact. Prime Minister Lawrence Wong reiterated in his 2025 Chinese New Year Message that families are the bedrock of Singapore’s society, which has been highlighted in the Forward SG report. Supporting families through every stage is one of the seven key shifts in Forward SG.
Sharpening economic competitiveness
Singapore’s upcoming budget will also likely focus on sharpening economic competitiveness to navigate a more uncertain and volatile external economic landscape, as well as tighter domestic constraints. Key initiatives will aim to build on the country’s leading position as a highly trusted and vibrant global business hub, and a reputable international finance centre.
We expect the government to continue focussing on long-term measures that build and grow sustainable and productive businesses, helping them transform to capture emerging opportunities, and scale internationally. Stronger enterprises will be better placed to succeed despite rising business costs. The Forward SG report also highlighted the need for a strong and vibrant economy by being open to attract quality investments, and improve productivity.
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