Singapore’s budget for 2025 has been released, and it is clear 2024 was a pretty good year for the city-state, at least in terms of fiscal solvency. The economy grew by around 4.4 percent in 2024, driving tax receipts higher than expected. With solid returns from state investment funds like Temasek and GIC, Singapore will close out its fiscal year with an estimated budget surplus of S$2.6 billion. This makes Singapore the first of the major regional economies to return to fiscal surplus since the pandemic.
It also comes as a bit of a surprise as last year planners were actually projecting a deficit of S$2.9 billion, meaning they ended up closing the deficit faster than expected. The main reason is that tax revenue over-performed forecasts. Regular operating revenue from taxes, duties, fees and so forth came in at S$116.6 billion, S$8 billion above what budget planners originally envisioned. A key part of this was an increase in the Goods and Services Tax (GST).
Singapore, like many countries in the region, has recently raised consumption taxes, with GST going from 8 to 9 percent in 2024. As a result, GST revenue increased by S$4 billion compared to the previous year, which was S$1 billion more than anticipated. Corporate income tax also brought in almost S$3 billion more than expected.
Government spending, meanwhile, stayed on target, which means that at the end of the day Singapore ended up with a surplus rather than the deficit they were projecting. In 2025, regular spending is set to go up by around 10 percent, and the government has set aside nearly S$4 billion to be disbursed through a variety of vouchers, rebates, and special transfers to help people with the cost of living and other things.
This includes the proposed SG60 voucher, meant to commemorate the country’s 60th anniversary. It will be distributed in July and gives S$600 to anyone between the ages of 21 and 59. Those 60 and up get S$800. Even with an uptick in regular government spending and special transfers, planners are still forecasting a surplus of around S$2.7 billion at the end of the year.
Another interesting thing about Singapore’s 2025 budget, to me anyway, is carbon taxes. Singapore is the first big economy in the region to introduce a carbon tax that has a good chance of actually being effective. From 2019 to 2023, Singapore imposed a tax of S$5 per ton of carbon emitted. The tax went up in 2024 to S$25 per ton. It will go up again in 2026.
But, despite big gains from other forms of taxation, carbon emissions have so far not been a big revenue generator for the state. The carbon tax only brought in S$196 million in the 2024 fiscal year, less than what it did in 2023. The 2025 budget is forecasting a fairly sharp increase here, with carbon taxes raising over $$640 million in revenue. It will be interesting to see if that target is achieved.
Raising taxes is rarely a popular policy decision. Indonesia scaled back its own planned consumption tax hike at the beginning of 2025 in the face of public pressure. But Singapore, which is one of the more fiscally prudent economies in the region, pushed ahead with its GST increase and economic growth last year ended up being quite solid. Now they are running a surplus, which is generally what the government prefers.
And there’s good reason to be cautious with fiscal policy as we enter 2025. As a small state heavily reliant on trade and finance, the years ahead could be especially bumpy for a country like Singapore as we enter a period of antagonistic trade, high geopolitical tension, and rising economic nationalism. Given the heightened levels of uncertainty and risk in the global economy these days, it makes sense for Singapore to shore up its fiscal position, look to run steady surpluses and keep its powder dry as we wait and see what the next few years hold.
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