Analyst: Government's fiscal year surplus expected to double compared to estimates; new budget proposal will not distribute red envelopes | Lianhe Zaobao

Driven by strong fiscal revenue, the Singapore government is expected to have a fiscal surplus by the end of this fiscal year in March, which is projected to be double the original expectations. This year marks the first fiscal budget of the new government. Analysts interviewed believe that the government is likely to maintain a balanced budget, with policy focus expected to be on enhancing economic resilience, improving employee skills, attracting investments, and helping local businesses adopt new technologies, but the "red packets" will not be as generous as last year. UOB's Chief Economist, Yean Sheng Chong, S&P Global analyst Yin Rui, and analysts from Fitch Solutions' research arm BMI, including Li Yan Ni, all predict that the government is expected to achieve a fiscal surplus equivalent to 2% of Gross Domestic Product (GDP) in the fiscal year 2025, higher than the original estimate of 0.9% or SGD 6.8 billion. Malayan Banking Berhad economist Li Shun Rong and OCBC Bank Chief Economist Lin Xiu Xin predict fiscal surpluses equivalent to 1.6% and 1.3% of GDP, respectively. Company Tax Growth of 10.4% in the First Eight Months of Fiscal Year 2025 Analysts attribute this better-than-expected performance to strong fiscal revenue. Yin Rui stated that in the first eight months of fiscal year 2025, operational revenue grew significantly, supported by strong economic performance, and exceeded estimates. According to data from the Ministry of Finance Accounting Office, as of November last year, the government's operational revenue for eight months reached SGD 91 billion, a year-on-year increase of 12.5%, accounting for 74.2% of the annual estimated operational revenue, far exceeding the estimated growth of 5.3%. Among various taxes, corporate tax performed the strongest, growing by 10.4% to SGD 27.7 billion, reaching nearly 90% of the annual estimate. Personal income tax increased by 8.4% to SGD 14.5 billion, and consumption tax rose by 6.9% to SGD 15.4 billion, both exceeding 70% of the annual estimates. The government will announce the 2026 fiscal budget on February 12, and analysts generally expect it to be a balanced budget without significant "red packets" The 2026 Budget Proposal May Focus More on Long-term Measures Lin Xiuxin expects the fiscal surplus for the fiscal year 2026 to be about 0.1% to 0.5% of GDP. Due to the economic growth in 2025 exceeding expectations, the subsequent growth in fiscal revenue will remain robust. After experiencing a year of turmoil due to Trump tariffs, the Ministry of Trade and Industry's preliminary estimates indicate that the economy will grow by 4.8% in 2025, which is better than the initial forecast range of 1% to 3%, and higher than the 4.4% growth in 2024. Yin Rui stated in an interview that since Singapore's actual fiscal performance often exceeds government forecasts, the fiscal surplus for the fiscal year 2026 is expected to account for at least 1.5% of GDP. Further Reading Our small and medium-sized enterprises have maintained expansion for three consecutive quarters, worrying about the influx of foreign enterprises "involution" Singapore injects over SGD 1 billion to deepen artificial intelligence research and talent cultivation The Bank of America economic research team believes that in the context of a robust economic growth outlook and the potential for a positive output gap in the coming quarters, the government will adopt a more conservative fiscal stance in the fiscal year 2026. Bank of America expects the 2026 budget proposal to have a surplus of about 1% of GDP, focusing more on long-term measures. This contrasts with the 2025 budget proposal, which was more "family-friendly" amid earlier concerns about the economic growth outlook Yan Shengchong predicts a 0.5% deficit in the fiscal year 2026, as expected economic growth slowdown will lead to a decline in corporate taxes and moderate growth in personal income tax. At the same time, he expects government spending to grow by 6.6%, with special transfers increasing significantly by 54%. The uncertainty brought about by potential "black swan" events may lead to economic growth falling short of expectations and worsening unemployment in the labor market, making it necessary to increase support. Lin Xiuxin stated that the first batch of recommendations from the Economic Strategy Review will be released soon, and the budget is expected to respond with policies. "Employment security and cost of living issues, especially housing, family, education, healthcare, and retirement security, are expected to continue to be key areas of policy focus. Given the complex and changing global economic environment, government spending may slightly lean towards growth-promoting measures, such as promoting digital transformation, investing in the green economy, and enhancing workforce skills." She mentioned that strengthening related measures is expected to enhance the adaptability of the labor market through incentives for training, hiring local employees, and supporting small and medium-sized enterprises in advancing digitalization. This aligns with broader fiscal efforts aimed at strengthening productivity and maintaining employment resilience. "With a relatively robust fiscal position, Singapore has the financial space to enhance economic resilience through investments in hardware and software infrastructure." Li Shunrong expects this budget to focus more on business development, employment security, and national capability building. The budget is likely to provide short-term support for the operational cost pressures faced by retail and food service businesses. Additionally, the government may offer more training or internship support for recent graduates facing difficulties in job hunting, further strengthening the SkillsFuture initiative. He also anticipates that the government will intensify efforts to assist businesses in applying artificial intelligence (AI) technology and training employees to seize growth opportunities in ASEAN and other overseas markets. DBS Bank economist Cai Hanting also believes that a key focus of the budget is to make good use of technology, especially artificial intelligence and innovation, to drive the next phase of growth. "In mature economies where resource constraints such as land and labor are becoming increasingly apparent, and issues like an aging workforce are exacerbating, technology and innovation will be key factors in enhancing competitiveness and economic growth over the next decade." Li Yanni expects the budget to focus on enhancing economic resilience in the medium to long term, with cash subsidies to households being smaller than in the fiscal year 2025. However, given that the economic performance in 2025 exceeded expectations, the government does not rule out the possibility of providing special transfers to households and businesses in the form of growth dividends