‘Pro-growth’ 2025 budget needed amidst global uncertainty: BofA

This year’s fiscal plan should contrast last year’s neutral stance.

The national budget for fiscal year (FY) 2025 should prioritise growth, given the uncertain global landscape and "low and stable" inflation, according to Bank of America (BofA).

In its latest Singapore Watch report, BofA said this will be a shift from the neutral fiscal stance for FY 2024, “which was calibrated to avoid stroking inflation.”

“Measures could lift GDP [gross domestic product] levels in [calendar year 2025] by ≥0.4%-pt, considering likely (1) positive fiscal impulse (from wider deficit for basic balance), (2) greater focus on households, and (3) ‘front-loading’ of ‘SG60’ measures ahead of National Day,” the bank said.

With accumulated surpluses, BofA expects the Ministry of Finance to widen the fiscal deficit in FY 2025 by up to $9.9b, which is 1.3% of GDP, while still staying within the Balanced Budget Rule.

Meanwhile, fiscal surplus in FY 2024 is expected to be near initial projections at $800m, which is 0.1% of GDP, with revenue upside channeled towards top-ups for endowment & trust funds. This adds to the cumulative fiscal surplus of $1b in FY 2021-2023, BofA said.

If there is room for supplementary spending, the bank estimates a fiscal deficit of $4b, which is 0.5% of GDP.

“This also leaves headroom ($5.9b by our estimates) to roll out supplementary measures without any draw on Past Reserves if growth outlook deteriorates sharply,” BofA said.

The bank said measures aimed at alleviating cost of living pressures will form the centerpiece of Budget 2025.

“A new ‘Package’ to support middle-age and middle-income group may be possible, given signals in the New Year Day Message. This would add to different packages rolled out over the past decade for those born in 1973 and earlier,” it explained.