Singapore Prime Minister Lawrence Wong. (PHOTO: Bloomberg)(Bloomberg)
By Claire Jiao
(Bloomberg) — Singapore Prime Minister Lawrence Wong will likely use his 2026 budget speech Thursday to position the nation as an artificial intelligence hub, a key facet of his government’s effort to diversify growth engines as global trade fractures.
Wong, who’s also finance minister, is expected to outline the city-state’s spending and strategies on the new technology, while reassuring citizens and small businesses that they won’t be left behind. Retraining and living costs for the rapidly aging population will also likely remain a focus.
The announcement of the annual budget — one of the most closely watched political events in Singapore — is expected to contain fewer handouts than 2025, when Singapore was headed into an election and was celebrating its 60th anniversary. Wong’s People’s Action Party, which has run the country since independence, subsequently won a bigger share of the vote.
Singapore may eye narrower surplus in upcoming Budget (CHART: Bloomberg)(Singapore Ministry of Finance)
Wong is also expected to provide an update on the Economic Strategy Review, which launched last year to refresh which industries the country will focus on.
The government will likely land on a budget surplus of 0.6% of gross domestic product for the 2026 fiscal year, which starts in April, according to the median estimate in a Bloomberg survey. It’s the first in a new five-year parliamentary term, within which the government is required by law to balance the budget.
“The government has historically been prudent in the first year, reserving some dry powder in the event of unexpected shocks or a downturn in later years,” Maybank Securities Pte Ltd.’s Chua Hak Bin and Brian Lee said in a report.
The fiscal 2025 budget totaled about S$147 billion ($116 billion), including about S$23 billion in so-called Special Transfers, which covers support such as cash, vouchers or rebates to individuals and businesses.
Singapore Prime Minister Lawrence Wong. (PHOTO: Bloomberg)(Bloomberg)
The surplus from that budget likely stood at 1.1% of GDP, according to the survey — above the original government forecast of 0.9% — as better-than-expected economic growth helped pad tax and duty collections. Authorities this week said the economy would likely expand 2%-4% this year, more than initially predicted though still slower than in 2025.
While the trade-reliant nation faces the lowest tariff of 10% imposed by the US, the risk of levies on semiconductors and pharmaceuticals cloud the outlook, said Yun Liu, an analyst at HSBC Holdings Plc.
“Despite decent growth, challenges are present,” she said. “A pick-up in inflation also raises concerns of renewed cost-of-living pressure, which calls for some support.”
Here’s what may be in Wong’s budget speech, which is scheduled to start about 3:30 p.m. local time Thursday:
AI Readiness
The budget could help firms adopt AI through a range of measures, including grants for digital transformation, training in governance and shared data pools.
“This would make businesses in Singapore as a whole more resilient and in turn equip all of us for the Intelligent Age,” said Paul Kent, a partner handling corporate transformation at KPMG LLP in Singapore.
The government could also ramp up funding for AI research and development, as well as investment in other high-tech capabilities, while continuing efforts to attract private sector investment. In January, Micron Technology Inc. said it will invest a further $24 billion in Singapore because of AI-related demand.
Singapore also announced more than S$1 billion in spending to fund public AI research over the next five years, and it’s setting up its own National Space Agency from April 1.
“We expect the budget to double down on upgrading national tech capabilities and resilience amid geopolitical rivalry, and rising competition for foreign direct investment in the region,” Maybank analysts said.
Jobs and Learning
The government will also be keenly aware of the potential downsides of AI. The budget could help support people at risk of being displaced by automation, through expanding internships for fresh graduates or re-skilling workers in vulnerable industries like call centers.
“Concerns are mounting over a K-shaped growth path — where wealth gains from a buoyant, tech-led market rally may not be broadly shared” while “risks of AI-related labor substitution continue to unsettle job seekers,” according to Jester Koh, an associate economist with United Overseas Bank Ltd.
There are also worries about the labor market. Among the budget recommendations submitted by the Singapore Business Federation is increased access to foreign labor. Nearly half of Singapore businesses it surveyed had reported rising costs and supply constraints due to the hiring restrictions.
Singapore’s inflation is set to track higher this year, which could put cost-of-living pressures back in focus. Cash handouts and rebates, however, will likely be targeted to lower-income households following the sweeping measures offered in the 2025 budget.
The nation is also expected to reach “super-aged” status in 2026, with more than 20% of its population aged 65 and above. That could prompt more funding for senior employment, age-friendly workplaces and homes, and retirement adequacy, according to Maybank.
Healthcare expenditure is also expected to rise significantly, UOB said. As the population ages and the fertility rate declines, that will shift the caregiving burden onto the public healthcare system.
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