Singapore unveiled a budget on Monday that contains higher retirement benefits, larger infrastructure spending and corporate tax rebates amid speculation early elections will be called this year.
The budget for the year starting April 1 comes out at a time the outlook for economic growth this year is tepid due to an uneven global recovery, while inflation is expected to ease to close to zero.
"The current global environment is not, however, just a temporary challenge," said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam in his budget speech.
"We may see prolonged, sluggish growth in the advanced world, as well as continued consolidation in China's growth as it reforms and rebalances its economy," he said.
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Singapore expects its economy to grow between 2 to 4 percent in 2015,compared with 2.9 percent in 2014.
The budget for fiscal 2015/2016 in effect increases forced savings for retirement by raising the ceiling on how much of a citizen's or permanent resident's income is subject to deductions for the state provident fund to S$6,000 ($4,406) a month from January 2016, from S$5,000. Also, the pension scheme will pay higher interest rates for older workers.
It also extended a wage credit scheme, which subsidies wage increases for lower-salaried workers.
Tharman said development expenditure will increase to about S$20 billion or 4.8 percent of gross domestic product in the coming fiscal year and grow further to about S$30 billion or 6 percent of GDP by the end of the decade.
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The investments include a new terminal at Changi Airport and development of Tuas seaport.
Growth Clusters Seen
In line with government efforts to lift productivity and cut dependence on foreign workers - whose big numbers have made citizens unhappy - Singapore no longer courts multinational companies that want to employ many low-cost employees.
But it is eager to attract more companies for cutting-edge production and outlined future growth clusters. These include advanced manufacturing, aided by new technologies such as advanced robotics, applied health sciences such as developing new medical devices, and logistics and aerospace.
Singapore also said it will defer this year's round of announced levy increases for foreign workers.
"Let me affirm unequivocally that while we are adjusting the pace of our foreign worker measures, we are not changing direction," Tharman said. "It remains crucial for Singapore that we restructure towards reducing our reliance on manpower, and find new and more innovative ways to do business."
The People's Action Party (PAP), which has ruled the city-state since independence in 1965, is credited with transforming it from colonial outpost into a global business hub.
But in the last election in May 2011, the party's share of the vote slipped to 60 percent from 67 percent in the previous poll, as there was unhappiness over high living costs and Singapore's growing wealth gap.
The next election can wait until January 2017. But there is speculation it will be called soon after Singapore celebrates its 50th anniversary of independence in August.