SINGAPORE – Singapore\u2019s unexpectedly large budget surplus of $15.1 billion for 2025 reflects increasing volatility in the global economy, said economists.<\/p>\n
They added that the Government had underestimated its revenue streams with the economy performing better than projected.<\/p>\n
Such windfall surpluses should be funneled back into society, said MPs, who called for more to be done to tackle longer-term challenges such as wealth inequality and upgrading estates.<\/p>\n
The surplus, which is equal to 1.9 per cent of gross domestic product (GDP), was more than twice the $6.8 billion that the Government had estimated last year.<\/p>\n
Delivering Budget 2026 on Feb 12, Prime Minister and Finance Minister Lawrence Wong said this was driven by better-than-expected economic performance in 2025, where the economy bucked earlier forecasts and grew 5 per cent.<\/p>\n
This indicates the surprise surplus \u2013 one of the largest in recent history \u2013 was driven by an unexpected and volatile increase in revenue rather than more conservative public spending, said National University of Singapore economist Chia Ngee Choon.<\/p>\n
OCBC chief economist Selena Ling noted that corporate income tax, a large component of the increase in revenue, hit 4 per cent of GDP \u2013 higher than the traditional 3 per cent.<\/p>\n
Tax takings from this category were revised upwards by $2.57 billion, noted Associate Professor Chia, who added that this reflects strong profitability in finance, tech, commodities trading and of Singapore as a hub for multinational firms.<\/p>\n
Higher collections from other areas such as vehicle quota premiums and stamp duty also contributed to the larger surplus.<\/p>\n
The upward revision also indicates that the Government was initially conservative in its estimates and anticipated global uncertainty with a moderate outlook on growth, she said.<\/p>\n
The difference between the government\u2019s estimate and the eventual surplus reflects Singapore\u2019s exposure to global profit cycles, she said.<\/p>\n
\u201cThe fiscal \u2018missed marksmanship\u2019 arises mainly from under-forecasting volatile revenue streams rather than spending control.\u201d<\/p>\n
She added that the key policy implication is that such surpluses may represent \u201ccyclical windfalls\u201d \u2013 which means they are the result of transient rather structural changes to the economy.<\/p>\n
The last time Singapore recorded such a large surplus by proportion of GDP was 2017 \u2013 when there was a $10.9 billion coming in at 2.1 per cent of GDP, said OCBC\u2019s Ms Ling.<\/p>\n
But the jump then was not due to an inaccurate judgment of corporate tax incomes.<\/p>\n
Instead, it was due to a sharp upward revision in contributions from statutory boards, exceptional contributions from the Monetary Authority of Singapore and higher stamp duty collections due to a property market pick-up, said NUS\u2019 Prof Chia.<\/p>\n
While the takings from the 2025 financial year will have to go into Singapore\u2019s past reserves as they are from the previous term of government, investment income from that pool contributes to future budgets.<\/p>\n
Bukit Panjang MP Liang Eng Hwa said surpluses create \u201cfiscal room\u201d to tackle immediate and medium-term challenges, and that it is prudent for the Government to keep some \u201cfiscal dry powder\u201d to deal with external shocks.<\/p>\n
He suggested several areas where the funds can flow, including additional public transport subsidies to moderate fare hikes and more support for businesses to cope with rising wage costs associated with salary increases for low-wage workers.<\/p>\n
He also called for more grants to upkeep ageing estates in areas like seepage repairs and to provide barrier-free access, as well as higher subsidies for flats which still do not have lift access.<\/p>\n
Sengkang GRC MP Jamus Lim raised concerns about what he called the Government\u2019s \u201cpoor fiscal marksmanship\u201d \u2013 an issue the WP also raised at the 2025 Budget debate after the Government adjusted its surplus for 2024 up from $778 million to $6.4 billion.<\/p>\n
Associate Professor Lim said these surpluses have occurred in an environment where the Government is expanding revenue sources \u2013 pointing to the increase in goods and services tax from 7 to 9 per cent in 2023 and 2024, which the WP opposed, and the new 20 per cent import tax on tobacco announced at Budget 2026.<\/p>\n
He said that while the WP agrees that fiscal buffers are important, that is the role of the national reserves.<\/p>\n
\u201cBut if a government consistently runs surpluses, it becomes natural to question if it should be taxing as much as it is to begin with, or if it is failing to spend as much as needed to help offset cost of living pressures.\u201d<\/p>\n
Jalan Besar GRC MP Shawn Loh said he hopes the Government can provide Singaporeans with more assurance that there will be no major revenue raising moves for the next 10 years.<\/p>\n
He added that the current surplus should give the Government the opportunity and confidence to tackle structural challenges such as wealth inequality, poverty among the elderly and worker training amid job disruption.<\/p>\n
\u201cI hope to see more longer term and multi-year measures, instead of single-year extensions of support,\u201d he said.<\/p>\n
Will bumper surpluses continue?<\/p>\n
Globally, most countries are running budget deficits, said NUS senior lecturer Chan Kok Hoe \u2013 although comparisons between different national budgets is difficult because of differences in computation.<\/p>\n
Exceptions to the trend include states with a large finance sector such as Switzerland, petro-states like Kuwait and Qatar, and small export-driven developed economies like Denmark or Ireland.<\/p>\n
In Singapore, the Government has to balance its Budget over its term, and accumulated surpluses at the end of a term \u2013 which is typically five years \u2013 are locked up as part of the reserves, said OCBC\u2019s Ms Ling.<\/p>\n
It has projected a surplus of $8.5 billion for 2026, which should bode well for future years should there be a downturn that requires stimulus, she added.<\/p>\n
But fiscal planning will soon enter a period of higher uncertainty as more measures related to a global agreement to raise corporate taxes \u2013 which Singapore is party to \u2013 will affect collections from 2027.<\/p>\n
Whether Singapore\u2019s surpluses will continue will depend on how fast, or slow, economic growth will be in the coming year, noted UOB head of research Suan Teck Kin.<\/p>\n
Due to Singapore\u2019s small size, open nature, and other constraints, its fiscal position and changes to its reserves \u2013 and hence its fiscal performance \u2013 are directly tied to global economic performance, he said.<\/p>\n
Its exceptional economic performance in 2025 was driven by strong external demand as companies responded to US tariff changes as well as AI-related investments, he noted.<\/p>\n
\u201cThat outperformance translated to stronger corporate profits and higher incomes that enabled the unexpectedly strong fiscal position.\u201d<\/p>\n
Mr Loh, a former Budget director who is now group managing director at Commonwealth Capital Group, said a rule of thumb fiscal planners used to follow was to expect corporate income tax collections to be around 3 per cent of GDP.<\/p>\n
But this has now gone beyond 4 per cent of GDP, a significant increase of about $10 billion, and the rule of thumb should be updated.<\/p>\n
He said the collections have been higher since the Covid-19 pandemic, which reflects an increase in the \u201cSingapore premium\u201d.<\/p>\n
This is the premium of stability and security that Singapore offers in a more unpredictable and dangerous world, he said.<\/p>\n
\u201cIt is the direct result of past Budgets, which invested in economic infrastructure as well as long-term security infrastructure. Our defence spending is consistently around 3 per cent (of GDP) \u2013 more than many NATO countries.\u201d<\/p>\n
Source: The Straits Times \u00a9 SPH Media Limited. Permission required for reproduction<\/a><\/p>\n