Singapore’s Prime Minister and Finance Minister Lawrence Wong delivered his first Budget Statement in February, coinciding with the 60th anniversary of Singapore’s independence. Here is an analysis of the budget’s impact on the economy and specific sectors.

Carmen Lee
Head, OCBC Investment Research,
OCBC

Singapore’s Prime Minister and Finance Minister Lawrence Wong delivered his first Budget Statement on 18 Feb 2025, coinciding with SG60, the 60th anniversary of Singapore’s independence.

The budget focused on six key areas: i) tackling cost pressure, ii) advancing Singapore’s growth frontiers, iii) equipping workers throughout their life, iv) building a sustainable city, v) nurturing a caring and inclusive society, and vi) rallying as one united people.

In line with these priorities, Singapore announced a range of support measures for households and businesses, including cost-of-relief vouchers, skills upgrading initiatives for workers, and tax rebates.

Near term cost-of-living relief for the people

The budget covered a few key themes including skills upgrading for workers and senior citizens, readying Singapore for future growth, support for all Singaporeans and marking SG60 celebrations, with all citizens aged 21 and above to receive S$600 from Jul 2025 onwards (S$800 for seniors aged 60 and above). Other goodies included:

• S$800 of Community Development Council (CDC) vouchers per household
• Higher grants to buy 2-room or 3-room flat (from S$50,000 to S$75,000)
• S$100 of Climate vouchers per HDB household in addition to the S$300 from last year; program was extended to private properties this year (S$400)
• Personal income tax rebate of 60% for FY25, capped at S$200
• S$100 of Culture Pass per person for Singaporeans aged 18 and above
• Central Provident Fund (CPF) rate for those aged 55-65 will increase by 1.5% in 2026
• S$500 of LifeSG Credit will be provided for every Singaporean child aged 12 and below, which parents can use to help defray household expenses
• Parents having their third child or more will get S$16,000 in extra support

While the above is largely positive for a pro-individual and pro-family budget, uncertainties and rising costs remain an issue. With geopolitical tensions and the rising trade tensions, regional trades and growth could be impacted in the coming years. While these measures will help to ready Singapore for part of the challenges ahead, the wide adoption of AI and Singapore’s ability to adapt to these changes will determine its longterm growth.

Long-term economic priorities and benefits for businesses

For companies, a corporate income tax rebate of 50%, capped at S$40,000 will be given. The government is also upping the co-funding for wage increases for lower-wage Singaporeans from 30% to 40%. On the construction and infrastructural front, more than 50,000 built-to-order (BTO) flats will be launched in the next three years. The Changi Airport Development Fund will also receive a S$5 billion top-up to ensure sufficient resources to develop Singapore's air hub.

In August 2024, the Monetary Authority of Singapore (MAS) announced that a Review Group had been formed to recommend measures to strengthen equities market development in Singapore. On 13 February 2025, the Equities Market Review Group announced its first set of measures to strengthen Singapore’s equities market development. These include proposals to introduce tax incentives to spur more listings and investments in Singapore’s equities market, which the Review Group has submitted to the PM and Minister for Finance. The PM has accepted their recommendations and will be introducing tax incentives for Singapore-based companies. There will also be tax incentives for fund managers which invest substantially in Singapore-listed equities. Subsequently, on 21 February 2025, the Monetary Authority of Singapore (MAS) launched a $5 billion programme through which it would partner with selected fund managers to invest in Singapore stocks, while streamlining regulations to help facilitate listings, among other measures. These measures were part of recommendations by the Equities Market Review Group. If the group can generate more interest in the Singapore market, this could help to raise market valuations and potentially result in a re-rating of the Singapore market.

Impact on Real Estate sector

Unlike last year, there were no new measures announced during Budget 2025 that would directly impact the property sector in a material manner. Given the focus on addressing cost of living pressures, the CDC vouchers issued to Singaporean households and the LifeSG credits for families with Singaporean children aged 12 and below (S$500 per child) would boost consumption spending and thus benefit retail REITs. However, the boost would be marginal as the rental income of retail REITs is predominantly made up of base rents; gross turnover rents typically contribute mid-to-high single digits of their total gross revenue.

PM Wong also highlighted that the government was paying close attention to the affordability of the public housing market and will be maintaining the robust supply pipeline of Build-To-Order (BTO) flats. The Ministry of National Development (MND) will launch more than 50,000 flats across different locations over the next three years. To accommodate home seekers who prefer quicker access to housing, approximately 20% (3,800 flats) of the 19,600 BTO launches planned for 2025 will have a waiting time of less than three years. In 2024, HDB resale prices jumped by 9.7%, outpacing the 4.9% increase in 2023. The new BTO supply, along with previously announced cooling measures such as the reduction in the loanto-value (LTV) ratio of HDB loans from 80% to 75%, would help to manage price growth of the HDB resale market.

Companies that could be impacted include APAC Realty Limited [non-rated], PropNex’s, CapitaLand Ascendas REIT and CapitaLand Investment Limited

Impact on Industrials

PM Wong mentioned during his speech that Singapore supplies more than 10% of semiconductor chips and produces one-fifth of semiconductor equipment globally. To support further innovation and technological progress, the government will be making a S$3 billion top-up to the National Productivity Fund (NPF). Within the biotech and semiconductor sectors, the government will also invest an additional S$1 billion in research infrastructure, including the development of a new national semiconductor research and development (R&D) fabrication facility. Further details on this initiative are still pending. Separately, the Future Energy Fund will also receive a S$5 billion top-up to support expanding access to clean energy and greater energy resilience.

Finally, to develop and ensure the competitiveness of Singapore’s air hub, the Changi Airport Development Fund will receive a S$5 billion boost, with Changi Airport’s Terminal 5 (T5) set to break ground in the coming months. The government will also provide a guarantee to Changi Airport Group (CAG) to lower the cost of borrowings needed to develop T5 and supporting infrastructure in the Changi East area. With T5, Changi Airport’s capacity will expand by more than 50%.

Companies which could be impacted include Frencken Group, Sembcorp Industries, Keppel Ltd, Keppel Infrastructure Trust and Nanofilm Technologies.

Impact on Consumers

This year’s budget contained a slew of supportive measures to help households cope with the elevated cost of living. This could potentially provide some boost to consumption spending locally.

Other measures such as U-Save rebates of up to S$760 for eligible HDB households to offset their utility bills and personal income tax rebates of 60% for Year of Assessment 2025 (capped at S$200) also contribute towards increasing disposable incomes. However, the incremental benefit to local retailers is more obscure given that this may also potentially encourage an increase in outbound travel, which would dilute spending domestically.

Companies that could be impacted include Sheng Siong as well as retail REITs such as Frasers Centrepoint Trust and CapitaLand Integrated Commercial Trust.

Impact on Communication Services

The government will allocate S$150 million for a new Enterprise Compute Initiative. This program aims to assist businesses in adopting AI by partnering them with major cloud service providers, granting access to AI tools, computing resources and expert consultancy services. The initiative will support enterprises that need AI solutions tailored to their needs and integrated into their business processes and systems.

Companies that could be impacted include Singapore Telecommunication and NetLink NBN Trust.

Impact on Singapore stock market

We maintain a positive outlook on the Singapore market, primarily due to its defensive characteristics and attractive dividend profile. With a current dividend yield of 5.3%, investors benefit from a healthy spread of 2.4% over the 10-year Singapore government bond yield, making it an appealing income-generating option. Additionally, the Straits Times Index (STI) exhibits lower volatility compared to its regional peers, making it a viable diversification option for sheltering against overall market fluctuations. Furthermore, despite a 16.9% price increase in 2024, the STI's valuations remain undemanding, currently trading at a forward P/E ratio of 11.8x, which is 0.5 standard deviations below its 10-year historical average. Moreover, potential capital market improvement measures proposed by the Equities Market Review Group could lead to a further positive re-rating for the Singapore market.

We note that there are potential downside risks on the external front. Although Singapore ended 2024 on a strong note, achieving a growth rate of 4.4% and surpassing the Ministry of Trade and Industry's (MTI) latest expectation of 4%, the Ministry of Trade and Industry has maintained its GDP growth forecast for 2025 at 1-3% year-on-year (YoY). This cautious outlook is influenced by several factors, including the escalation of geopolitical conflicts and increased uncertainty surrounding US trade policies. Even if Singapore avoids direct tariffs from the US, it remains indirectly affected; potential tariffs on its major trading partners could lead to a slowdown in global economic growth and trade.

Selected Singapore stocks under coverage

Source: Bank of Singapore; updated on 18 Feb 2025