$15.1b budget surplus reflects uncertain economy, cyclical windfalls, say economists

SINGAPORE – Singapore’s unexpectedly large budget surplus of $15.1 billion for 2025 reflects increasing volatility in the global economy, said economists.

They added that the Government had underestimated its revenue streams with the economy performing better than projected.

Such windfall surpluses should be funnelled back into society, said MPs, who called for more to be done to tackle longer-term challenges such as wealth inequality and upgrading estates.

The surplus, which is equal to 1.9 per cent of gross domestic product (GDP), is more than double the $6.8 billion that the Government estimated in 2025.

Delivering Budget 2026 on Feb 12, Prime Minister and Finance Minister Lawrence Wong said this was driven by better-than-expected economic performance in 2025, where the economy bucked earlier forecasts and grew 5 per cent.

This indicates that the surprise surplus – one of the largest in recent history – was driven by an unexpected and volatile increase in revenue rather than more conservative public spending, said National University of Singapore (NUS) economist Chia Ngee Choon.

OCBC Bank chief economist Selena Ling noted that corporate income tax, a large component of the increase in revenue, hit 4 per cent of GDP – higher than the traditional 3 per cent.

Tax takings from this category were revised upwards by $2.57 billion, noted Associate Professor Chia, who added that this reflects strong profitability in finance, tech and commodities trading, and Singapore’s role as a hub for multinational firms.

Higher collections from other areas such as vehicle quota premiums and stamp duty also contributed to the larger surplus.

The upward revision also indicates that the Government was initially conservative in its estimates and anticipated global uncertainty with a moderate outlook on growth, Prof Chia said.

The difference between the Government’s estimate and the eventual surplus reflects Singapore’s exposure to global profit cycles, she said.

“The fiscal ‘missed marksmanship’ arises mainly from underforecasting volatile revenue streams rather than spending control.”

She added that the key policy implication is that such surpluses may represent “cyclical windfalls” – which means they are the result of transient rather than structural changes to the economy.

The last time Singapore recorded such a large surplus by proportion of GDP was in 2017 – when it was $10.9 billion, or 2.3 per cent of GDP, said OCBC’s Ms Ling.

But the jump then was not due to an inaccurate judgment of corporate tax incomes.

Instead, it was due to a sharp upward revision in contributions from statutory boards, exceptional contributions from the Monetary Authority of Singapore, and higher stamp duty collections due to a property market pickup, said Prof Chia.

While the takings from the 2025 financial year will have to go into Singapore’s past reserves as they are from the previous term of government, investment income from that pool contributes to future budgets.

Bukit Panjang MP Liang Eng Hwa said surpluses create “fiscal room” to tackle immediate and medium-term challenges, and that it is prudent for the Government to keep some “fiscal dry powder” to deal with external shocks.

He suggested several areas into which the funds can flow, including additional public transport subsidies to moderate fare hikes and more support for businesses to cope with rising wage costs associated with salary increases for low-wage workers.

He also called for more grants for the upkeep of ageing estates in ways such as carrying out seepage repairs and providing barrier-free access, as well as higher subsidies for flats which still do not have lift access.

Sengkang GRC MP Jamus Lim raised concerns about what he called the Government’s “poor fiscal marksmanship” – an issue his Workers’ Party also raised at the 2025 Budget debate after the Government adjusted up its surplus for 2024 from $778 million to $6.4 billion.

Associate Professor Lim said these surpluses have occurred in an environment where the Government is expanding revenue sources – pointing to the increase in the goods and services tax from 7 per cent to 9 per cent over two years in 2023 and 2024, which the WP opposed, and the new 20 per cent import tax on tobacco announced at Budget 2026.

He said that while the WP agrees that fiscal buffers are important, that is the role of the national reserves.

“But if a government consistently runs surpluses, it becomes natural to question if it should be taxing as much as it is to begin with, or if it is failing to spend as much as needed to help offset cost-of-living pressures.”

Jalan Besar GRC MP Shawn Loh said he hopes the Government can provide Singaporeans with more assurance that there will be no major revenue-raising moves for the next 10 years.

He added that the current surplus should give the Government the opportunity and confidence to tackle structural challenges such as wealth inequality, poverty among the elderly, and worker training amid job disruption.

“I hope to see more longer-term and multiyear measures, instead of single-year extensions of support,” he said.

Will bumper surpluses continue?

Globally, most countries are running budget deficits, said NUS senior lecturer Chan Kok Hoe – although comparisons between different national budgets are difficult because of differences in computation.

Exceptions to the trend include states with a large finance sector such as Switzerland, petro-states like Kuwait and Qatar, and small, export-driven developed economies like Denmark or Ireland.

In Singapore, the Government has to balance its Budget over its term, and accumulated surpluses at the end of a term – which is typically five years – are locked up as part of the reserves, said OCBC’s Ms Ling.

It has projected a surplus of $8.5 billion for 2026, which should bode well for future years should there be a downturn that requires stimulus, she added.

But fiscal planning will soon enter a period of higher uncertainty as more measures related to a global agreement to raise corporate taxes – which Singapore is party to – will affect collections from 2027.

Whether Singapore’s surpluses will continue will depend on how fast, or slow, economic growth will be in the coming year, noted UOB head of research Suan Teck Kin.

Because of Singapore’s small size, open nature and other constraints, its fiscal position and changes to its reserves – and hence its fiscal performance – are directly tied to global economic performance, he said.

Its exceptional economic performance in 2025 was driven by strong external demand as companies responded to US tariff changes as well as artificial intelligence-related investments, he noted.

“That outperformance translated to stronger corporate profits and higher incomes that enabled the unexpectedly strong fiscal position.”

Mr Loh, a former Budget director who is now group managing director at Commonwealth Capital Group, said a rule of thumb fiscal planners used to follow was to expect corporate income tax collections to be around 3 per cent of GDP.

But this has now gone beyond 4 per cent of GDP, a significant increase of about $10 billion, and the rule of thumb should be updated.

He said the collections have been higher since the Covid-19 pandemic, which reflects an increase in the “Singapore premium”.

This is the premium of stability and security that Singapore offers in a more unpredictable and dangerous world, he said.

“It is the direct result of past Budgets, which invested in economic infrastructure as well as long-term security infrastructure. Our defence spending is consistently around 3 per cent (of GDP) – more than many NATO countries.”

Correction note: This story previously stated that the Bugdet surplus from 2017 was 2.1 per cent of GDP. The correct figure is 2.3 per cent.