Budget 2025 likely to talk about cost of living, investments in AI, finance, green transition and fertility: UOB
UOB's economist Jester Koh predicts Singapore to have a 'modest' fiscal deficit of $2.7 billion or 0.4% of GDP in FY2025.
Singapore's Budget 2025 is likely to take on an expansionary fiscal stance ahead of this year's general elections, says UOB's associate economist Jester Koh. The budget, which will be presented by Prime Minister and finance minister Lawrence Wong on Feb 18, is likely to be the final one under the current term of government. The general elections will have to be held by Nov 23.
'Since 2005, we observe that the overall fiscal position tends to be more expansionary (i.e. wider deficit) in the final two years of the five-year terms of government, possibly due to increased spending ahead of the general elections,' Koh writes. 'This could also be the upshot of adhering to the principles of fiscal prudence where precautionary spending led to meaningful accumulation of fiscal surpluses in the first three years of the terms of government (except in 2021-2023 during the post-Covid recovery phase) and spending is subsequently augmented in the last two years, nonetheless keeping within the limits of the Balanced Budget Rule (BBR).'
In his Jan 31 note, Koh predicts Singapore's overall fiscal position in FY2024 to be at $5.0 billion or 0.7% of the country's GDP, compared to $0.8 billion or 0.1% of Singapore's GDP estimated in Budget 2024.
Based on historical revenue collection patterns and monthly fiscal year-to-date data from April to December 2024, Koh also estimates Singapore's operating revenue for FY2024 to be 'significantly higher' than projected at last year's Budget. This is due to stronger corporate income taxes thanks to a positive outturn in economic growth of 4% in 2024, compared to the Ministry of Trade and Industry's (MTI) estimate of 1% to 3%. During the year, Singapore also reported larger personal income tax receipts, which was attributed to improvements in nominal income growth. In addition, the strong growth in Goods and Services Tax (GST) receipts were partly due to the 1 percentage point increase in GST to 9% on Jan 1, 2024.
Based on historical data and quarterly fiscal year-to-date data from April to September 2024, Singapore's total expenditure could also come in higher in FY2024. Possible overspending could come from the various ministries in national development (MND), transport (MOT), home affairs (MHA) and defence (MINDEF). At the same time, these could be offset by undershoots under the ministries of social and family development (MSF), sustainability & the environment (MSE) and manpower (MOM).
Furthermore, the fiscal deficit for FY2023 could be narrowed to $2.9 billion or 0.4% of Singapore's GDP, compared to the previous projection of $3.6 billion or 0.5% of GDP.
As such, these factors will give the government more room to help lower income households from the higher cost-of-living pressures while still sticking to the principle of fiscal prudence.
With a stronger fiscal position, Koh foresees that Budget 2025 should be 'broadly expansionary'. This year's budget should also see a 'modest' fiscal deficit of $2.7 billion or 0.4% of GDP in FY2025.
Budget 2025 themes
In Koh's view, this year's Budget could revolve around four main themes.
They are: cost-of-living and job security measures; strategies to boost the nation's fertility rate; anchoring investments in key areas such as artificial intelligence (AI), finance and the green transition to create good jobs and upskill the workforce, as well as supporting families through every stage of life. The last point is based on Chapter 4 of the Forward Singapore Report and the National Day Rally speech in 2024.
In addition, UOB's wishlist includes Singaporeans receiving additional Community Development Council (CDC) vouchers of at least $600 per household in FY2025. The bank also hopes to see an enhancement and rebranding of the assurance package to go along with the themes of SG60. This year will be Singapore's 60th birthday since its independence in 1965. Specifically, the bank hopes to see a higher quantum of payouts and U-save rebates under the package in 2026 with an extended support scheme for low- and middle-income households beyond 2026.
Other items on UOB's wishlist include a one-off cost-of-living cash support for low-income households and the augmentation of the SkillsFuture Jobseeker Support (JS) or SkillsFuture Level-up Programme.
Softer growth rates in 2025
In 2025, the economist expects the growth rate for corporate and personal income tax collections to moderate, in line with the estimated softening in nominal GDP growth. The latter is due to a lower real GDP growth forecast of 2.5% in 2025 as well as a normalisation in the pace of general price increases.
Similarly, Koh expects nominal wage growth to soften in 2025 in line with a cooling – albeit still tight – labour market. According to the MOM's latest polls, about 31.6% companies surveyed in 4Q2024 say they intend to raise their employees' wages compared to 32.6% of companies polled in 4Q2023.
Meanwhile, the softer corporate income growth is estimated to be mitigated by the implementation of both the Income Inclusion Rule (IIR) and the Domestic Top-up Tax (DTT) under Pillar Two of BEPS 2.0. Both regulations will take effect for businesses' financial years beginning on or after Jan 1 this year.
GST collections will also likely see slower y-o-y growth compared to the near 20% increases seen in FY2023 and FY2024 no thanks to the successive 1 percentage point GST hikes on Jan 1, 2023, and Jan 1, 2024.
In 2025, Koh foresees 'resilient' stamp duty collections as private property transaction volumes has likely bottomed out, with tailwinds from the ongoing easing of interest rates by the Federal Reserve and its consequent passthrough to domestic Singapore overnight rate average (SORA) rates, albeit with a lower sensitivity.
The increase in the supply of certificates of entitlement (COE) should also 'bode well' for vehicle quota premiums, especially if there is still robust demand for motor vehicles.
Looking ahead, Koh projects healthcare-related expenses to rise 'materially' over the long-term due to higher spending requirements stemming from an ageing population. According to the National Population and Talent Division, a strategy group under the Prime Minister's Office (PMO), one in four citizens are likely to be aged 65 years or above by 2030 from about one in five currently.
In the occasional paper on medium-term fiscal projections published by the Ministry of Finance (MOF) in 2023, the government says it expects healthcare expenses to increase to 2.9% to 3.5% of Singapore's GDP in FY2026-FY2030 compared to 2.3% in FY2016-FY2020 and 2.9% in FY2021-FY2025.
Singapore's defence spending is also likely to stabilise in the years ahead due to the rising need to bolster defence capabilities as well as the need to uphold deterrence amid heightened geopolitical tensions and cybersecurity threats. This observation comes despite the general downward trend as a share of nominal GDP in recent years, which is in line with member countries of the Organisation for Economic Co-operation and Development (OECD).
In addition, the Net Investment Returns Contribution (NIRC), which has become an increasingly important supplement to Singapore's operating revenues, should see positive impact in the long run thanks to the facilitation of the transfer of excess Official Foreign Reserves (OFR) to the government for long-term management by GIC via the Reserve Management Government Securities (RMGS).
Finally, Koh foresees the ongoing capitalisation of development expenditure under the Significant Infrastructure Government Loan Act (SINGA10) on projects such as the North South Corridor, Deep Tunnel Sewerage System, the Cross Island Line and the Jurong Region Line.
The economist forecasts core inflation in 2025 to average around 1.7%, down from 2024's 2.7%, signalling a return to a desired pace of price increases.
Singapore's real GDP is likely to grow by 2.5%, down from 2024's 4.0%, due to a slowdown in growth momentum in trade-related sectors in 2H2025 from tariffs.
Charts: UOB
See Also:
Click here to stay updated with the Latest Business & Investment News in Singapore
Jefferies targets DBS shares to hit $49; UOB to hit $42; OCBC to reach $19 ahead of 4QFY2024 results
Our 2025 picks: UOB — Banking dilemma throws up a dark horse
JS-SEZ might have increased urgency for DBS to expand into Malaysian market: CreditSights
Read more stories about where the money flows, and analysis of the biggest market stories from Singapore and around the World
Get in-depth insights from our expert contributors, and dive into financial and economic trends
Follow the market issue situation with our daily updates
Or want more Lifestyle and Passion stories? Click here
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
2 hours ago
- Yahoo
Who won the first NYC Democratic mayoral primary debate?
Ex-Gov. Andrew Cuomo won Wednesday night's Democratic mayoral primary debate — because his opponents' relentless attacks did more to elevate him than drag him down, a Post panel of veteran campaign strategists said. The thrice-elected Democrat took some gut punches, but there was no knockout blow or major blunder on his part, the political analysts on both sides of the aisle said. 'I tuned in to see a mayoral debate, not a debate about Andrew Cuomo,' quipped campaign strategist Ken Frydman of the nine-person debate moderated by NBC 4 NY and Politico. 'By making Andrew the debate, they elevated him,' said Frydman. Because Cuomo was constantly under fire, he got more airtime to respond to each jab and by default dominated the more than two-hour debate, the political experts said. 'Everyone tried to land a punch on Andrew Cuomo, but failed,' said campaign strategist O' Brien 'OB' Murray. 'The first 20 minutes gave Cuomo the center stage, literally and figuratively,' he said, referring to the ex-gov's position in the middle of the group of candidates standing on the dais at 30 Rockefeller Center. 'He handled the attacks and was able to deflect. They actually gave him more airtime than they should have,' Murray said. Republican campaign strategist Bill O'Reilly said the verbal pummeling Cuomo received from most of his eight primary rivals does not alter his status as the front-runner for the Democratic nomination. 'It was Andrew Cuomo vs. the Lilliputians, and the Lilliputians fell short. That's the bottom line,' O'Reilly said. 'Someone needed to trip up the former governor to slow his momentum, but it was clear from the jump that wouldn't happen. Cuomo hasn't lost a step since leaving Albany, and the field lacked the skill to crack him.' Cuomo also counter-attacked, taking shots at his biggest threats in the polls — 33-year-old Democratic socialist Zohran Mamdani, a state Assembly member from Queens, and City Comptroller Brad Lander. The former governor delivered the best line when he said, '[President] Trump would go through Mamdani like a hot knife through butter,' O'Reilly noted. Frydman said the candidates and moderators did force Cuomo to squirm to defend his record as governor, including his controversial nursing home policy during the COVID-19 pandemic and his approval of the unpopular 2019 bail reforms. They also tried to make him answer for the spate of sexual misconduct accusations leveled against him — which he denied, but which forced his resignation in 2021. Some of the other candidates had 'breakout moments' — including former Bronx Assemblyman Michael Blake, City Council Speaker Adrienne Adams and Mamdani, said political adviser Yvette Buckner. 'That will have voters wanting to learn more about them, their policies and their candidacy,' she said. Frydman too said Adams' performance 'moved the needle' for her campaign, which has been slow to gain momentum despite support from state Attorney General Letitia James. 'She introduced herself to Democratic voters well enough on substance to move up in ranked-choice voting,' he said. But Cuomo's comfortable lead over second-place Mamdani in recent polls should hold, Frydman said. O'Reilly agreed, but said Mamdani remains Cuomo's 'greatest threat' for the nomination in the June 24 primary. Two of the panelists agreed that Lander is competent, but his persona didn't translate on TV. 'He oozes insincerity in a car-salesman-type way,' O'Reilly said. But he said Brooklyn state Sen. Zellnor Myrie's sincerity came across 'easily,' calling him a rising star in the Democratic Party. Murray concurred, saying Lander has a 'stage presence for radio and a delivery for print. He confirmed why he has his wife and daughter on videos, instead of himself.' Another candidate, former city Comptroller Scott Stringer, who previously ran for mayor in 2021, didn't break through, the panelists said. 'Stringer was Stringer — flat, and after a second run for mayor, still didn't connect to voters,' Murray said. All but two of the Democratic contenders will debate again on June 12, save for Blake and state Sen. Jessica Ramos, who failed to meet the campaign funding threshold. Nine days of early voting will precede the primary, beginning on June 14.
Yahoo
2 hours ago
- Yahoo
Artists who got almost $1,500 a month under a basic income pilot say their work improved
Ireland's basic income pilot program for the arts ends in August. For three years, 2,000 artists and creative arts workers received about $370 a week. Recipients said the stipend overall improved their daily lives. For about 2,000 artists and creative arts workers in Ireland, a weekly stipend provided through a basic income program has been a lifeline for years. Now, it's almost over. The pilot program began in 2022 under Catherine Martin, Ireland's former minister for tourism and culture. Martin allocated about $28 million to the arts sector following the COVID-19 pandemic. Participants were randomly chosen and given an unconditional stipend of €325, or about $370, weekly for three years. During that time, participants met periodically via Zoom to discuss how the additional income had affected their livelihoods, careers, and ability to meet basic needs. The final session was held this month before the program's conclusion in August. Artists and cultural workers who attended the session grappled with what their lives would look like after August, but they hoped government officials would extend the program. "We need no further pilots. People need a UBI now to face and deal with the many social, economic, and ecological crises of our world," Reinhard Huss, the organizer of UBI Lab Leeds, which sponsored the event alongside Basic Income Ireland, UBI Lab Arts, and UBI Lab Network, told Business Insider. New developments in AI are reshaping the job market, replacing some entry-level positions. Tech industry leaders like Elon Musk and OpenAI CEO Sam Altman have said implementing a universal basic income will be essential in the near future when AI supplants jobs in most industries. A universal basic income offers an entire population recurring, unconditional payments regardless of an individual's socioeconomic status. Ireland's program, like many others in the United States, is a guaranteed basic income, which targets certain segments of the population for a set period of time. Jenny Dagg, a sociologist lecturing at Ireland's Maynooth University, authored a new report that provides insights into participants' reactions to the program. She gathered data from over 50 of the 2,000 recipients. Although the report outlined nearly a dozen key impacts reported by program recipients, Dagg highlighted five major takeaways during the Zoom session. Dagg said that recipients who received money from the program reported more stability and "significantly reduced" financial stress. It relieved their anxiety about fulfilling their basic needs. Participating in the pilot program also allowed artists to re-prioritize how they spend their time and what they choose to focus on. "The opportunity to focus more on their specific creative interests opened new possibilities and career trajectories," the report said. Artists said the added income allowed them to spend more time "researching, experimenting, taking risks, and failing," which has improved the quality of their work. Artists, the report said, also felt more confident in themselves and their work during the program. "Many recipients talk of feeling empowered, of being in control of the choices within their lives, and envisioning a viable career path longer-term," the report said. Recipients even reported better mental health, which led to improved sleep quality and lowered stress levels. With the end of the program fast approaching, recipients of the weekly payment are reckoning with what how their lives might change. "Across art forms, recipients report concerns about financial stability and sustaining the momentum of their careers when, or if, the basic income scheme ends," Dagg's report said. This month, Basic Income Ireland called on the government to immediately implement a universal and unconditional basic income for the country. A spokesperson for the UBI Lab Network said the pilot program's success shows that basic income is a viable option. The campaign group shared a proposal for introducing a universal basic income to Ireland. "As the pilot shows, basic income works and people need a UBI now to face and deal with the many social, economic, and ecological crises of our world. The Network will continue to help demonstrate basic income within communities and show how it is a sustainable policy," the statement said. Patrick O'Donovan, Ireland's minister for arts and culture, said he would evaluate the data collected throughout the pilot program and create proposals for the government regarding the next steps. "I am heartened by the responses of the Basic Income recipients in this paper," O'Donovan said in the May report. "This research will add to the evaluation being conducted by my department, which to date clearly shows that the Basic Income Pilot has been an effective support for the artists in receipt of it." Read the original article on Business Insider
Yahoo
2 hours ago
- Yahoo
Hispanic Heritage Council receives $7M for construction of cultural institute
BUFFALO, N.Y. (WIVB) — The Hispanic Heritage Council of Western New York will receive $7 million from New York State to complete the construction of its cultural institute on Buffalo's West Side, Gov. Kathy Hochul announced Sunday. The council's plans for the multi-use 37,000-square-foot facility on the corner of Niagara and Hudson Streets was first announced in 2019, but it has since faced delays due to COVID-19. Hochul described the investment as a 'gap-filling' initiative for phase two of the institute, which will serve as a hub for Hispanic history, arts and community. The $30 million facility broke ground in September 2023 at the beginning of Hispanic Heritage Month. The council plans for the institute to house a museum, 150-seat performing arts theater, event spaces, cafe, media center and learning labs. 'We are deeply grateful to Governor Hochul for her unwavering support of the Hispanic Heritage Cultural Institute. This historic investment is not just a milestone for the Buffalo Hispanic community — it's a gift to all of Western New York,' said Casimiro Rodriguez, the council's president and founder. 'As the first of its kind, this institute will serve as a vibrant hub for arts, culture, education, and heritage, drawing visitors from near and far, including our Canadian neighbors. It will enrich our region's cultural landscape and strengthen our identity as a welcoming and diverse community. The future is bright, and we are filled with hope and gratitude as we take this giant step forward together.' Hochul said the previous announcement in 2023 of a $5 million grant, along with additional funding, will continue to help with the completion of the project's second phase and grand opening. 'New Yorkers of Puerto Rican heritage have been an integral part of our state's cultural fabric for generations,' Hochul said. 'We are honored to make bold investments that will empower organizations to expand and thrive, ensuring that the vibrant presence of Puerto Rican culture in New York State remains a cherished aspect of our state's identity.' The council also received $1 million in federal funding in August 2023 for construction. Katie Skoog joined the News 4 team in April 2024. She is a graduate from the University at Buffalo. You can view more of her work here. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
