(Feb 18): Singapore’s 2025 budget is expected to boost the lending, consumer and green energy sectors, while providing a push to the city state’s stock market. 

The government will increase handouts and rebates to households, Prime Minister Lawrence Wong said in his budget speech on Tuesday, as Singapore heads for general elections this year. 

It will offer limited rebates on corporate taxes and tax incentives for domestic listings, as the market loses its appeal amid a dearth of new offerings. A S$1 billion (US$744.8 million or RM3.31 billion) investment will also be allocated for a research and development semiconductor facility. 

Singapore’s stocks benchmark Straits Times Index (STI) extended gains to close at a new high on Tuesday. The 10-year bond yield increased three basis points, the most in more than a week, while the local dollar was little changed after the announcement. 

“From artificial intelligence to clean energy, this budget cements its leadership in emerging industries, ensuring jobs and investments flow in,” said Mohit Mirpuri, a fund manager at Singapore-based SGMC Capital Pte Ltd. “Tax incentives for fund managers and listed firms could sustain the STI’s positive momentum from 2024, and enhance capital flows into Singapore.”

The government expects its budget to generate a surplus of 0.9% of gross domestic product in the fiscal year beginning April. That was unexpected, with a Bloomberg survey of analysts forecasting a deficit.

“Top ups of various infrastructure funds should be positive for loan growth of banks,” said Krishna Guha, an analyst at Maybank Securities Pte Ltd. “The measures to defray inflation and support consumption should be positive for retail as well as supportive of bank asset quality.”

Singapore’s biggest banks DBS Group Holdings Ltd, Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank Ltd (UOB) may see a pickup in business activity and an improvement in asset quality following the new measures, Bloomberg Intelligence analysts Sarah Jane Mahmud and Alison Hor said in a report. 

Higher co-funding levels for wage hikes and a 50% corporate income-tax rebate are likely to help small businesses manage costs and reduce credit stress for lenders, Bloomberg Intelligence analyst Rena Kwok wrote in a separate note. 

The budget also includes cash handouts to Singaporean households to cushion the high cost of living. This may aid retail sales and result in higher turnover rents for retail mall landlords, including the CapitaLand Integrated Commercial Trust, Frasers Centrepoint, Suntec Real Estate Investment Trust and Mapletree Pan Asia Commercial Trust, according Bloomberg Intelligence analyst Ken Foong.  

Meanwhile, Singapore Airlines Ltd may indirectly benefit from the government’s latest round of vouchers, as it could help widen local households’ travel budgets, Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu wrote in a report. 

Read also:
Singapore taps revenue surge to boost handouts ahead of election
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