Despite the Singapore government's generous spending plans, with total expenditures surpassing operating revenues, Singapore is projected to achieve a fiscal surplus of S$6.8 billion, or 0.9% of GDP, for the fiscal year 2025.

This is partly attributable to a 12.9% increase in the Net Investment Returns Contribution (NIRC), which amounts to S$27.1 billion.

This surplus contrasts with economists' expectations, who had anticipated a deficit in the government's final budget before the next general election scheduled for November.

Chua Hak Bin, an economist at Maybank, suggested that the surplus leaves "some available funds" that could be utilized later in the fiscal year if the economy "strays off course in a more uncertain world."

He added that, given this year marks the Republic's 60th anniversary, the government could also allocate part of the surplus to celebrate National Day.

This is the second planned surplus following the S$778 million surplus projected for FY2024, which has now been revised up to S$6.4 billion. Out of the last three planned deficits, two (in FY2021 and FY2022) also ultimately resulted in surpluses.

**Higher Revenues**

Operating revenues for FY2025 are expected to be S$122.8 billion, a 5.3% increase over the revised S$116.6 billion revenues for FY2024.

The largest contributor is corporate income tax, with expected revenues of S$32.7 billion. This is an increase of S$1.8 billion, or 5.8%, over the revised FY2024 figure.

Other major drivers include personal income tax, goods and services tax, as well as customs, excise, and carbon taxes.

In percentage terms, the largest increases are in customs, excise, and carbon taxes, up 17.1% to S$4 billion, and other taxes, up 11.5% to S$10.2 billion.

These other taxes include foreign worker levies, water conservation taxes, land betterment charges, and annual tonnage taxes.

**Higher Expenditures**

However, operating revenues fall short of total expenditures, which are projected to be S$123.8 billion, or 16.2% of GDP. This is a 9.6% increase over the revised S$112.9 billion for FY2024.

The largest driver of this increase is healthcare spending, which will account for 16.9% of total government expenditure at S$20.9 billion, an increase of S$2.9 billion, or 16.3%, over the previous year.

This is due to increased subsidies for public healthcare institutions, rising operational costs, and the construction of major healthcare facilities.

The second-highest increase is in the Ministry of Defence, whose budget remains the largest among ministries at S$23.4 billion, up S$2.6 billion, or 12.4%, from FY2024. This is primarily due to the acceleration of key projects and progress on the Marina Bay construction project and the National Service Square.

The Ministry of Trade and Industry's budget is expected to increase by S$1.2 billion, or 19.9%, to S$7.2 billion, due to increased demand for the Singapore Enterprise Development Fund.

In contrast, the Ministry of National Development's expenditures will decrease. Its budget is S$9.3 billion, down 7.5% from S$10.1 billion. This is due to reduced operating grants for public housing and lower requirements for public housing town upgrading programs and infrastructure provisions.

The difference between operating revenues and total expenditures results in a primary deficit of S$1 billion. After special transfers, the primary deficit widens to S$4.8 billion, reflecting an expansionary stance.

S&P Global Market Intelligence expects the FY2025 budget to drive real GDP growth of 2.6%. For instance, this will stimulate domestic demand as households receive up to S$800 in Community Development Council vouchers and a 60% personal income tax rebate, capped at S$200.

However, after deducting the S$27.1 billion NIRC (capped at half of the long-term returns on Singapore's investment reserves) and the top-ups to endowment and trust funds, the primary deficit turns into an overall budget surplus of S$2.7 billion.

Selena Ling, chief economist at OCBC, noted that the over S$3 billion increase in NIRC was a surprise and may not be sustainable in the medium term. "Moreover, thinking the other way, I suspect they may have also factored in some upside in terms of economic growth."

After accounting for the capitalization of major infrastructure and related interest costs and loan disbursements, the overall fiscal surplus is estimated at S$6.8 billion.

This surplus stands in stark contrast to the "stimulative" deficit economists had expected, as the FY2024 surplus created fiscal space. The Singapore government must maintain a balanced budget over its term, which ends in FY2025.

Chua Han Teng, an economist at DBS Bank, stated that this year's surplus reflects Singapore's strong fiscal position and "long-standing adherence to fiscal prudence."

He pointed out that the total surplus from FY2021 to FY2025 is expected to be around S$14.3 billion—"a commendable achievement considering the turbulent times the Singapore economy has experienced over these years."