Why Singapore’s had a Budget Surplus

A Deep Dive into Fiscal Resilience and Strategic Generosity

Singapore’s fiscal performance in 2024 has defied expectations, delivering a remarkable surplus of S$6.4 billion, equivalent to 0.9% of its gross domestic product (GDP). This figure, reported by Bloomberg and detailed in the Budget 2025 speech by Prime Minister and Finance Minister Lawrence Wong on February 18, 2025, surpasses the earlier projection of a modest S$0.8 billion surplus. Far from being a fluke, this achievement reflects a robust economic strategy fueled by diverse revenue streams—Certificate of Entitlement (COE) premiums, personal income tax, and state investment returns via the Net Investment Returns Contribution (NIRC). As of today, February 20, 2025, this fiscal success not only showcases Singapore’s economic resilience but also sets the stage for a generous Budget 2025, strategically timed ahead of a national election due by November 2025. In my view, this surplus is a testament to Singapore’s fiscal discipline and adaptability, though it raises critical questions about sustainability and equitable distribution that demand scrutiny.

The implications of this surplus are profound, especially given Singapore’s constitutional mandate that prohibits carrying surpluses across government terms. This rule has spurred a wave of government transfers and “SG60 goodies” in Budget 2025, celebrating the nation’s 60th year of independence. While some might see this as populist largesse, I argue it’s a calculated move to bolster public support and economic momentum ahead of the polls. However, beyond the political optics, the surplus offers a rare opportunity to invest in long-term growth and social equity—a chance Singapore must seize rather than squander on short-term handouts. Let’s unpack the key drivers of this fiscal windfall and explore their broader significance.

COE Premiums: The Unexpected Revenue Engine

One of the standout contributors to the 2024 surplus was the S$6.54 billion collected from COE auctions, a staggering 38.5% increase over the estimated S$4.72 billion. This revenue, derived from Singapore’s vehicle quota system, reflects both an increase in quota levels and near-record-high bidding prices, with COEs for larger cars hovering around S$110,000. According to the Ministry of Finance (MOF), this trend of exceeding expectations has held true in three of the past five fiscal years, underscoring the COE system’s growing role as a fiscal powerhouse. Looking ahead, the government projects COE premiums to reach a record S$6.6 billion in fiscal year 2025, despite pledges to increase the supply of certificates.

This reliance on COE revenue is a double-edged sword. On one hand, it’s a brilliant mechanism to regulate vehicle ownership in a land-scarce city-state while generating substantial funds—funds that have tipped the budget into surplus territory. On the other hand, it places a disproportionate burden on middle- and upper-income households seeking car ownership, effectively acting as a regressive tax in a system already criticized for escalating living costs. The government’s plan to boost COE supply is a step in the right direction, but I contend it’s insufficient without broader reforms to ensure affordability. Data from the Land Transport Authority (LTA) shows COE prices for Category B (larger cars) peaked at S$146,002 in October 2023 before stabilizing, yet they remain exorbitant by global standards. Singapore must rethink this model to balance revenue generation with social equity, lest it alienate the very electorate it seeks to woo.

Personal Income Tax: A Steady Climb Reflecting Economic Health

Personal income tax collections in fiscal year 2024 rose by 8.3% year-on-year, reaching nearly S$19 billion, outpacing earlier estimates. This growth, as noted by the MOF, stems from robust nominal wage increases in 2023, a sign of Singapore’s economic vitality despite global headwinds. Complementing this, corporate income tax soared to S$30.9 billion—a 10.2% jump above the projected S$28 billion—driven by strong performances in finance, insurance, and wholesale trade sectors. Together, these tax streams highlight a thriving private sector, with corporate tax now overtaking NIRC as the largest single revenue source, contributing 4.1% of GDP compared to a historical average of 3.2%.

This tax windfall is a clear win for Singapore’s fiscal strategy, reflecting a business-friendly environment that attracts multinational enterprises and fosters domestic growth. However, I see a missed opportunity here. The 60% personal income tax rebate for Year of Assessment 2025, capped at S$200, is a welcome relief for middle-income earners, but its modest scope—announced in Budget 2025—feels like a token gesture when juxtaposed against the S$6.4 billion surplus. With personal income tax revenue climbing, the government could afford bolder relief measures to offset the 9% Goods and Services Tax (GST) hike implemented in 2024, which netted S$20.6 billion. The GST increase, while cushioned by vouchers, disproportionately impacts lower-income households. I firmly believe Singapore should channel more of this tax surplus into progressive policies—think enhanced childcare subsidies or healthcare top-ups—rather than leaning on consumption-based taxes that strain the less affluent.

State Investment Returns: The Quiet Giant of NIRC

The Net Investment Returns Contribution (NIRC) delivered S$24 billion in fiscal year 2024, exceeding estimates by S$520 million, and is forecasted to rise 13% to S$27.1 billion in 2025. Comprising up to half of the net investment income and long-term expected real returns from Temasek, GIC, and the Monetary Authority of Singapore, NIRC is a cornerstone of Singapore’s fiscal stability. This mechanism, unique in its scale and foresight, leverages decades of prudent reserve management to fund current expenditures without depleting principal savings—a model envied globally. In 2024, Singapore’s reserves were estimated at over S$1 trillion, per the Sovereign Wealth Fund Institute, reinforcing NIRC’s reliability as a revenue stream.

Yet, this reliance on state investment returns isn’t without risks. Global market volatility, geopolitical tensions, and potential shifts in investment yields could dent NIRC’s growth trajectory. While Temasek reported a 1.8% return for the year ending March 31, 2024, and GIC achieved a 20-year annualized real return of 4.6%, these figures aren’t guaranteed indefinitely. I argue that Singapore’s heavy dependence on NIRC—projected to hit S$27.1 billion in 2025—necessitates a contingency plan. Diversifying revenue beyond COEs and taxes, perhaps through innovative public-private partnerships or green bonds, would safeguard against future downturns. The S$5 billion injection into the Future Energy Fund announced in Budget 2025 is a promising start, but more aggressive diversification is imperative to sustain this fiscal golden goose.

Budget 2025: Strategic Generosity or Electoral Play?

With a projected surplus of S$6.81 billion for fiscal year 2025—defying economists’ expectations of a 0.3% GDP deficit—Singapore is doubling down on generosity. Budget 2025 includes S$800 in CDC vouchers for households, S$600-$800 in SG60 vouchers for adults over 21, and a 50% corporate tax rebate capped at S$40,000. These measures, unveiled against the backdrop of a S$6.4 billion 2024 surplus, have sparked debate. Some view them as prudent redistribution; I see them as a shrewd electoral tactic. With a general election looming by November 2025, the People’s Action Party (PAP) is clearly aiming to solidify voter goodwill, leveraging fiscal strength to counter cost-of-living concerns amplified by the GST hike.

This approach has merits—vouchers and rebates directly alleviate financial pressures—but it’s shortsighted. The surplus offers a chance to tackle structural challenges like an aging population (projected to see 25% of citizens over 65 by 2030, per the Department of Statistics) or housing affordability, where HDB resale prices rose 6.6% in 2024 alone, according to the Housing and Development Board. Instead, the government opts for populist giveaways over transformative investments. I contend that reallocating a portion of this surplus—say, S$2 billion—into a sovereign wealth-backed universal basic income pilot or expanded SkillsFuture credits would yield greater long-term dividends, enhancing resilience rather than merely placating the electorate.

Seizing the Moment for Lasting Impact

Singapore’s fiscal surplus in 2024 and projected strength in 2025 are enviable feats, driven by COE premiums, tax growth, and NIRC stability. Yet, this windfall isn’t a license for complacency. The trends—rising COE costs, tax reliance, and NIRC dependence—signal both opportunity and vulnerability. I firmly believe Singapore must pivot from short-term generosity to strategic foresight, channeling surplus funds into equitable, future-proof initiatives. The S$5 billion Changi Airport Development Fund top-up and S$3 billion National Productivity Fund injection in Budget 2025 are steps forward, but they’re not enough.

​For readers—be they policymakers, businesses, or citizens—my advice is clear: demand accountability and vision. Push for policies that balance immediate relief with sustainable growth, like tax restructuring to ease GST burdens or investments in green infrastructure to diversify revenue. Singapore stands at a fiscal crossroads; it must choose legacy over largesse. The surplus is a golden ticket—let’s not cash it in for fleeting applause but invest it in a future that cements Singapore’s global standing for decades to come.