More support for businesses and households

Singapore on Tuesday unveiled steps to support households and businesses in its 2025 fiscal year, as Lawrence Wong set out to combat cost-of-living concerns in his first budget as prime minister.

Wong, who previously delivered Singapore’s budgets as finance minister, said that the measures follow the rise in global inflation following the Russia-Ukraine war and disruptions in energy, food and supply chains.

He announced each household will now receive 800 Singapore dollars ($596) in consumption vouchers over the course of 2025, while all Singaporeans above the age of 21 or the age of 60 will respectively get an additional SG$600 and SG$800 of vouchers in July, to commemorate the country’s 60th year of independence.

A 60% personal income tax rebate was also announced for the 2025 assessment year, capped at SG$200.

On the business front, Wong announced a 50% rebate for corporate income tax for companies.

Eligible companies will receive a minimum benefit of SG$2,000 even if they are not profitable, as long as they are active and have employed at least one local person in 2024. This benefit will be capped at SG$40,000 for each company.

The government will also increase co-funding levels for companies that raise the salaries of lower wage workers.

While Wong said that these measures will help mitigate the impact of rising costs, he added that “the best way to adjust to higher prices is to grow the economy and increase productivity, so that Singaporeans can enjoy higher real incomes and better standards of living.”

Speaking to CNBC after the speech, Song Seng Wun, Singapore economic advisor at CGS International, said that the budget was more focused on the “softer side” of enhancing social policies, such as support schemes for families and children.

Song explained that, “in terms of building up Singapore as a business hub, connections to the world for trade in goods and services, that has generally mostly been done. Now it’s really about enhancing it to maintain its edge versus everybody else.”

Wong pledged Singapore will take “bold and decisive actions to advance our growth frontier” amid intensifying competition, pointing out that “we will be left behind” in the event of failure.

He noted that, while the country’s economy expanded by more than 4% in 2024, that level of growth will be difficult to achieve on a sustained basis.

Wong added that if Singapore could secure an average of 2%-3% growth per annum over the next decade, “we will be able to create better jobs and opportunities, and improve standards of living for all Singaporeans.”

In light of that, the prime minister said, the government will extend support programs for companies that want to globalize, as well as for mergers and acquisitions.

Singapore will also introduce a new SG$1 billion Private Credit Growth Fund to give companies more financing options, Wong said attributing the decision to the emergence of a private credit market that offers “innovative financing solutions to companies.”

Wong pointed out that companies may also want to list on a stock exchange to access more capital, as they scale up.

It comes as Singapore’s monetary authority set up a review group to strengthen the attractiveness of the Singapore stock market back in August 2024, with the first set of measures — including several tax-related recommendations — in on Feb. 13.

Wong said he has accepted the recommendations, and will introduce tax incentives for Singapore-based companies and fund managers that choose to list in Singapore and grow their economic activities locally.

Tax incentives for fund managers will be given to those who “invest substantially” in Singapore’s capital markets, in order to encourage more investment in the country’s capital markets.

“The SGX listing incentives are substantial, but challenges like market liquidity and valuations remain. The impact will also depend on further recommendations from Singapore’s Equities Review Group,” Ajay Kumar Sanganeria, partner and head of tax for KPMG in Singapore, told CNBC on Tuesday.

The review group is expected to deliver a subsequent update on Feb 21.

Turning to technology, Wong said that enterprises must now invest in technology, including in analytics powered by artificial intelligence, so as to enhance their competitiveness and productivity.

He then announced that the government will set aside SG$150 million for a new Enterprise Compute Initiative, where eligible enterprises will be partnered with major cloud service providers to access AI tools and computing power, as well as expert consultancy services, so that they can leverage AI more effectively.

Sanganeria said that, “by prioritizing advancements in infrastructure, exploration of new energy solutions, and climate resilience, Budget 2025 positions Singapore as a global value creation hub.”

He added that Singapore’s focus on fostering leadership in technology and sustainability “reaffirms the nation’s ambition to remain a leader in these critical areas.”

Wong said Singapore’s revenue collection was “better than expected” in the 2024 fiscal year, mainly because of an upside in corporate income tax. He projected that corporate income tax takings will rise to 4.1% of GDP in the 2024 fiscal year, up from about 3.2% in the past.

That’s despite higher expenditure, such as top-ups to Singaporeans’ medical savings accounts and the earmarking of projects such as a fifth terminal for Changi International Airport.

The government therefore expects to end its 2024 fiscal year with a surplus of SG$6.4 billion, or 0.9% of Singapore’s gross domestic product. It anticipates ending the 2025 fiscal year with a surplus of SG$6.8 billion.

CGSI’ Song said that the fiscal surplus was “a bit more” than what he expected, pointing out that most analysts had projected the government would deliver an expansionary budget and project a deficit for fiscal year 2025.

Under the Singapore Constitution, an administration must maintain a balanced budget in each term of government and can only tap past reserves with presidential approval. The government is not allowed to borrow to fund its operating expenses.

Correction: This article has been updated to accurately reflect the amount of the expected budgetary surplus in the 2025 fiscal year.