On the financial front, policymakers are working to revitalise Singapore’s local stock market. The MAS equities market review group is exploring measures to attract companies and investors.

As Budget 2025 approaches on Feb 18, DBS Group Research economist Chua Han Teng sees its focus split between addressing near-term cost challenges, and rolling out further initiatives under Forward Singapore (Forward SG).

Chua notes in his Feb 5 report: “We expect Singapore’s economic expansion to be buoyant at 2.8% in 2025, in line with our estimated medium-term potential rate of 2% to 3%, but with considerable downside uncertainties.” 

He adds that the global economy in 2025 is marked by heightened policy uncertainty, particularly in trade. A more protectionist stance led by a potential Trump administration in the US threatens to disrupt global supply chains and impose higher tariffs, posing significant risks to trade-dependent economies like Singapore. 

Chua warns: “A more protectionist global trade landscape from higher tariffs led by Trump’s US government poses medium-term challenges and downside risks to highly trade-dependent economies like Singapore.”  

Compounding these challenges are regional conflicts, technological disruptions, and the escalating impacts of climate change. Domestically, Singapore must also contend with binding constraints such as limited land and labour resources. 

Yet, amid these pressures, the city-state’s economy remains resilient. Chua understands that inflation, a persistent concern in recent years, is expected to ease further in 2025. “We forecast Singapore’s headline inflation to return to the pre-pandemic 2010 to 2019 average of 1.7% in 2025.” Despite this, the lingering effects of past price increases continue to weigh on households and businesses, placing pressures on households and businesses.

Fiscal flexibility 

Singapore’s prudent fiscal management has provided the government with significant room to manoeuvre. 

Chua writes: “We see the Singapore government having some fiscal room to provide support in budget 2025, and expect an overall fiscal deficit of $3.8 billion or 0.5% of gross domestic product (GDP) for FY2025.”

He continues: “We estimate that the cumulative overall fiscal surplus from FY2021 to FY2024 could therefore exceed $1.8 billion, registering at $6.6 billion, implying greater fiscal ammunition for FY2025.”

The government’s robust revenue collection, driven by strong corporate and personal income taxes, as well as goods and services taxes (GST), has bolstered its fiscal position. “We estimate that corporate income taxes, personal income taxes, and GST reached 90%, 82%, and 77% of their respective full-year FY2024 budgeted amounts in 9MFY2024, and they look on track to surpass initial allocations,” writes Chua. 

Domestic and abroad

Another aim of the fiscal buffer is to address pressing domestic concerns, including cost-of-living pressures and support for families.  

Despite easing inflation, consumer prices have risen significantly since 2019, with headline and core consumer price index (CPI) increasing by 16% and 12%, respectively. On this, Chua notes: “Singapore’s government has committed to more targeted support to alleviate households’ cost-of-living pressures.” 

He adds that with the nation gearing up for general elections by November, budget 2025 is expected to include generous measures, such as additional handouts through CDC vouchers, cash, and utilities rebates.  

Initiatives to support parents, caregivers, and seniors are also likely to feature prominently. 

Chua explains: “We expect extensions of existing schemes such as the Senior Employment Credit and the Part-time Re-employment Grant beyond 2025. Extending these schemes would be in line with increasing the retirement age to 64 and reemployment age to 69 in 2026, as part of ongoing gradual steps to raise them to 65 and 70, respectively, by 2030.”

Meanwhile, in a more uncertain global environment, Singapore is doubling down on efforts to sharpen its economic competitiveness. Manpower costs, while less acute than two years ago, remain a top challenge for businesses. 

On this, the economist writes: “Budget 2025 could consider various recommendations from trade associations and chambers to alleviate near-term business costs, such as tweaking the Progressive Wage Credit Scheme and deferring the increase in Foreign Worker S Pass Levy and enhancing the Enterprise Financing Scheme.”

Chua expects the government to continue building on long-term measures that build and grow sustainable and productive businesses. He expects a focus on emerging growth areas such as artificial intelligence (AI) and sustainability. “We anticipate budget 2025 to assist workers and businesses to transform and harness these leading opportunities in AI and sustainability.” 

The Productivity Solutions Grant (PSG) in particular has been key in helping small-and-medium enterprises (SMEs) implement digital and automation solutions to raise productivity over the years. 

“We see room for enhancements to the PSG to encourage wider adoption of AI functionalities and solutions, as proposed by the Singapore Business Federation (SBF). While more than half of SMEs see no need to adopt due to their small scale, according to the Singapore Digital Economy Report 2024, tweaks to support measures could nudge them to accelerate digitalisation,” writes Chua.

Looking outward

Finally, Singapore’s small domestic market necessitates a strong focus on internationalisation. 

In Chua’s view, the upcoming budget is likely to include measures to support businesses in accessing overseas markets, particularly through initiatives like the Market Readiness Assistance (MRA) grant. 

Additionally, details on Singapore’s dedicated fund for the Johor-Singapore Special Economic Zone (JS-SEZ) could be unveiled, complementing Malaysia’s MYR5 billion ($1.53 billion) commitment to infrastructure development. 

On the financial front, policymakers are working to revitalise Singapore’s local stock market. The Monetary Authority of Singapore’s (MAS) equities market review group is exploring measures to attract companies and investors, with potential fiscal support to catalyse growth.  

Chua concludes that the upcoming budget could include measures to catalyse the domestic equities market. 

“Regarding demand side measures, deputy prime minister Gan Kim Yong stated on Jan 2 that the review group is studying the optimal use of government seed capital to attract more commercial capital, such as institutional wealth, individual investors and family offices, on a sustained and fiscally responsible basis.”