Economists say that Singapore should have sufficient fiscal space to deal with the 2025 budget (the last budget of this government), as a "handsome" surplus is expected in the fiscal year 2024.

At least six banks have released forecasts for the 2025 budget deficit, ranging from S$3 billion to S$6.6 billion.

According to the constitution, the Singaporean government must maintain a balanced budget throughout its term. This term started after the 2020 General Election (GE) and spans from the fiscal year 2021 to the fiscal year 2025.

Selena Ling, the chief economist of OCBC Bank, pointed out that there were surpluses in both the fiscal years 2021 and 2022, but most of these surpluses were offset by the deficit in the fiscal year 2023. She told The Business Times that this means any surplus in the fiscal year 2024 (from April 1, 2024, to March 31, 2025) will essentially form the "fiscal margin" for the 2025 budget.

Lawrence Wong, the Prime Minister and Minister for Finance, will deliver the budget statement on February 18, ahead of the national general election that must be held in November.

Divergent Estimates

Among the six banks that have released deficit forecasts for the fiscal year 2025, RHB Bank has the highest absolute forecast, at S$6.6 billion, accounting for approximately 0.8% of the GDP of that year.

Barnabas Gan, the acting group chief economist, and Laalitha Raveenthar, the associate research analyst, said in a report on February 10 that this is based on the assumption that the surplus in the fiscal year 2024 is 0.8% of the GDP, that is, S$6.1 billion.

This figure is higher than their previous forecast of a 0.1% GDP surplus. The economists from RHB Bank pointed out that Singapore's operating income in the first three quarters of the fiscal year 2024 was S$87.5 billion, accounting for approximately 80.5% of the official full - year forecast.

They expect another excellent performance of S$26.5 billion in the fourth quarter, bringing the full-year operating income to S$114 billion, exceeding the official forecast of S$108.6 billion.

Chua Hak Bin and Brian Lee, economists from Maybank, also expect that the surplus in the fiscal year 2024 will account for 0.8% of the GDP, and the cumulative surplus throughout the election term will reach S$6.7 billion.

They said in a report on February 4 that their forecast for the 2025 budget deficit is slightly smaller, at S$6 billion, although this still means "using up most of" the cumulative surplus.

Caution Advised

Both Ling from OCBC Bank and Liu Yun, the ASEAN economist from HSBC, expect a deficit of S$5.7 billion in the 2025 budget, although their estimates of the surplus in the fiscal year 2024 are quite different.

Ling predicts a "handsome surplus" of S$6.8 billion in the fiscal year 2024. She said that as a result, the 2025 budget may "have a stimulating deficit of S$5.7 billion" "because this may be the last budget of this government, and the external economic outlook remains challenging against the backdrop of a possible Trump 2.0 policy shift".

Ms. Liu expects a significant increase in the surplus for the fiscal year 2024, reaching S$8.8 billion, which could "lay the foundation for a generous budget in the fiscal year 2025". But she also forecasts a deficit of S$5.7 billion. She pointed out: "Although theoretically the surplus could be fully spent in the fiscal year 2025, considering Singapore's consistent cautious stance, we don't think this will be the case."

Chua Han Teng, an economist from DBS Bank, expects the deficit in the fiscal year 2025 to reach S$3.8 billion, while he anticipates a surplus of S$5.5 billion in the fiscal year 2024. He added in a report on February 5 that the cumulative fiscal surplus from the fiscal year 2021 to the fiscal year 2024 could reach S$6.6 billion, "which means there will be more fiscal ammunition in the fiscal year 2025".

Kit Wei Zheng, an economist from Citi, expects the smallest deficit of S$3 billion in the fiscal year 2025. But after the upward revision of the full-year GDP growth data on Friday (February 14), he pointed out that an increase in the surplus in the fiscal year 2024 may provide "more room" for a larger deficit.

His estimate of the surplus in the fiscal year 2024 is also the lowest, at 0.6% of the GDP, that is, S$4.2 billion. However, he believes that given the "increase in revenue and lower-than-expected development expenditure" in the first three quarters of the fiscal year 2024, there is an "upside risk" to this figure.