Singapore reserves fiscal resources amidst heightened global economic risks: analyst

Nomura said this cautious approach reflects the government’s recognition that global uncertainty remains elevated.

The Singapore government is deliberately reserving fiscal resources, or "keeping some powder dry," to ensure it can respond flexibly if global economic challenges become more severe, according to Nomura.

In its report, Nomura said this cautious approach reflects the government’s recognition that global uncertainty remains elevated.

By maintaining available fiscal space, the government is positioning itself to deploy additional support measures if external economic headwinds intensify, which allows for a dynamic fiscal response without jeopardizing long-term financial stability.

The Fiscal Year 2025 Budget revealed an unexpected overall fiscal surplus of 0.9% of GDP, defying consensus forecasts and Nomura’s earlier projection of a 0.3% deficit.

Despite this surplus, the basic balance—a preferred indicator of fiscal stance—shifted to a deficit of 0.6% of GDP, down from a 0.1% surplus in FY24, designed to provide a buffer against external risks and ensure the economy remains resilient amidst global uncertainties.

Nomura notes that the government’s 2025 GDP growth forecast remains at 2.8%, aligning closely with official 1–3% projections, whilst the core inflation forecast is maintained at 1.4%.

The expansionary fiscal stance, complemented by targeted budget measures, is expected to support household spending and labor market conditions ahead of the anticipated general elections.

Notably, Nomura believes that the reserved fiscal capacity could prove vital if external conditions worsen, providing the government with the flexibility to inject further stimulus into the economy.