The upcoming Budget could help the private sector, particularly small and medium-sized enterprises (SMEs), by lowering levies for foreign workers, according to UOB Global Economics and Markets Research yesterday.

This is because the Government will likely focus on addressing the immediate and medium-term needs of the economy, given the protracted global economic slowdown and unsuccessful attempts to push productivity higher.

The report noted that previous Budgets were centred more on addressing key social issues and promoting an inclusive society.

"Steps were also made to address key economic issues, but seemingly not enough. Labour costs continue to rise and productivity stagnated during those years," it said.

Although Singapore is not experiencing a recession, economic growth has been "very slow", said UOB, adding that this year's Budget will need to "balance both short- and medium-term policy implementation very intricately".

The report said global economic weakness has had a much bigger impact on externally oriented sectors than on domestically oriented ones due to international competition for products or services. Growth in externally oriented sectors - such as finance and insurance, wholesale and retail trade, and manufacturing - has lagged behind domestic sectors for the past 16 consecutive quarters, except for the first quarter of 2014.

"Budget 2016 should take this into consideration and help to reduce some costs of doing business for these sectors, thus freeing up some cashflow for companies during these difficult times," it said.

The report suggested the Government should continue to push for productivity growth, particularly in domestically oriented sectors, and promote innovation and internationalisation at export-led businesses.

But it also acknowledged that constraints remain.

"Being the first term of Government, it has to be prudent in spending as it could not utilise any surpluses accumulated by the previous term," said the report. "Moreover, slower economic growth in 2015 will mean smaller incremental revenue derived from corporate and personal income taxes."

UOB estimates an overall budget deficit of $69 million for the 2015 fiscal year, at 0.2 per cent of gross domestic product (GDP). This is down from the deficit of $6.9 billion, or 1.7 per cent of GDP, initially expected by the Government during last year's Budget. It estimates an overall budget surplus of $1.43 billion, or 0.34 per cent of GDP, for the 2016 fiscal year.