Budget 2025: A bonanza Budget with no pain, and no red ink

In more than 30 years of reporting on Singapore Budgets, I have never come across one as generous as

Budget 2025,

which Prime Minister and Finance Minister Lawrence Wong announced on Feb 18 – though this is perhaps not surprising in an election year.

Sweeping in its scope, this Budget’s largesse extends to individuals and families, with bespoke benefits targeted at different segments of the population. It strengthens the enterprise ecosystem, helps businesses manage costs, and expands and simplifies support for training workers and building new skills.

It also boosts innovation and invests in infrastructure in ways that will have long-term payoffs, such as through

top-ups of $5 billion each

to the Changi Airport Development Fund

, the

Future Energy Fund

and the

Coastal and Flood Protection Fund

.

Just about every family and company stands to benefit from Budget 2025, which lives up to its claim to be a “Budget for all Singaporeans”.

The size of Budget 2025, at $143.1 billion, is 6.6 per cent bigger than the revised estimate for the 2024 fiscal year (FY).

Something for everyone

The support for individuals and households, which amounts to more than $3 billion, includes CDC vouchers, U-Save utilities rebates, climate vouchers, special SG60 vouchers, MediSave top-ups, cash payouts, culture passes, and personal income tax rebates, to cite a partial list, with some benefits coming through almost every month in 2025 from April.

There is also

support targeted at families,

especially those with children, as well as seniors, hawkers, people with disabilities and even former offenders.

A lot of these benefits are intended to defray living costs. This might seem curious after a year in which inflation declined. However, cumulative headline inflation over recent years has been significant, at around 16 per cent from 2019 through 2024, which has translated into higher costs of living, especially for lower-income groups.

Low-income workers also stand to gain from the enhancement of the Progressive Wage Credit Scheme, under which the Government co-funds wage increases for such workers. Co-funding levels will increase from 30 per cent to 40 per cent in 2025, and from 15 per cent to 20 per cent in 2026. But to be sustainable, wage hikes will need to be accompanied by increases in productivity, which are lagging, especially in domestically focused sectors. It will be vital for companies in these sectors in particular to step up automation and upskilling, taking advantage of

some of the incentives in the Budget

.

Enterprises did not get some of the items on their pre-Budget wish lists. For example, some had lobbied for tax rebates for non-residential properties, which could be passed on to tenants. Others wanted a deferral of increases in foreign worker levies. The Singapore Business Federation and consulting firm PwC had also proposed a more generous version of the Productivity Solutions Grant, which helps companies to accelerate digitalisation, given that the upgraded solutions now being offered for digitalisation, including through the use of AI, will cost more.

Rather than address such issues individually, the needs for which vary from company to company, PM Wong chose to introduce a 50 per cent corporate income tax rebate across the board, with a generous cap of $40,000 on benefits that any company can receive. Loss-making companies, to which the tax rebate would not apply, will get a minimum benefit of $2,000 provided they are active and employed at least one local worker last year.

No red ink

If this Budget seems more generous than anyone expected, the good news is that the Government has been able to deliver it without going into the red. Despite all the giveaways, tax breaks and big-ticket investments, the Government expects

a fiscal surplus of $6.8 billion,

or 0.9 per cent of gross domestic product (GDP) in FY2025.

This was partly enabled by

higher-than-expected GDP growth of 4.4 per cent

in 2024

, which helped boost operating revenue, which is estimated at 16.1 per cent of GDP in FY2025, from 15.6 per cent in FY2024. Especially notable was the unexpected jump in corporate tax collections to 4.1 per cent of GDP in FY2024, compared with 3 per cent to 3.3 per cent from FY2019 to FY2022. Corporate tax is now the largest contributor to total revenue, exceeding contributions from the Net Investment Returns Contribution or the goods and services tax.

But going forward, the picture looks more sobering. For a start, GDP growth is forecast to slow to 1 per cent to 3 per cent in 2025, which would affect tax collections in the coming year.

Over the medium term, PM Wong cautioned that “there is still considerable uncertainty about how government revenues will unfold over the coming years”, adding that “it is too early to determine if the recent increase in corporate income tax collections is temporary or a lasting trend”.

New hazards

Geopolitical developments also pose new hazards – such as higher trade tariffs, an upending of supply chains, as well as a possible resurgence of inflation – that were not present when the Government released an occasional paper in 2023, which projected a roughly balanced fiscal position until 2030. These developments will add to uncertainties relating to the growth of exports as well as GDP over the medium term, not only for Singapore, but also for its trading partners.

What is more certain is that increases in expenditure will continue, especially in the area of social spending. Forward Singapore – the 4G leadership’s signature initiative with its emphasis on expanding social safety nets and inclusion – is expensive, and will only get more so with an ageing population and the continued need for reskilling and income support, as well as infrastructure costs. The Government projects that overall, spending could go up to 20 per cent of GDP by 2030, from an estimated 18.7 per cent of GDP in FY2025.

So, over the medium term, pressures on revenue will rise. One of the striking features of Budget 2025 is that it contains no significant tax increases or other measures to raise revenue. While this is admittedly a wise policy in an election year, future Budgets will need to address this issue, and the sooner, the better.

Correction note: In an earlier version of the story, we said that loss-making companies, to which the 50 per cent corporate income tax rebate would not apply, will get a minimum benefit of $2,000 provided they employed at least one local worker last year. This is incorrect. These firms will get a minimum benefit of $2,000 provided they are active and employed at least one local worker last year.