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Budget 2026, scheduled for delivery on February 12, will likely emphasize strategically positioning Singapore’s economy to remain competitive. This will be crucial for navigating the structural challenges of an increasingly fractured and disruptive global landscape, amid domestic resource constraints.

Navigating a fractured global landscape

The increasingly fractured global landscape, which challenges Singapore’s future growth prospects, will likely persist. After withstanding the US tariff shock well in 2025, replicating the firmer-than-expected and well-above-trend economic expansion of 4+% in the two past years will be tough in 2026. Real GDP growth is seen to normalise lower to a 1-3% range this year, as per the Ministry of Trade and Industry’s forecasts.

Nonetheless, Singapore is coming from a position of strength, and will build on its solid macroeconomic fundamentals and structural advantages. These include political stability, a strong rule of law, a predictable regulatory landscape, an effective government, and minimal corruption – all coupled with a business-friendly ecosystem. To sustain a competitive, vibrant, and thriving economy with good jobs in the next phase of development, the government has embarked on an Economic Strategy Review (ESR) since August 2025 to refresh the economic blueprint. It has signalled its intent to address the mid-term update of the ESR in Budget 2026.

First budget of a new term of government

We note that Budget 2026 will be the first fiscal plan of the new term of government, which can last up to five years. It will play a critical role in strengthening the foundations for durable, long-term economic growth, amid external challenges. However, fiscal rules require a balanced budget over the term of government. We, therefore, expect the fiscal position for FY2026 to strike a balance between calibrated and targeted policy support, and fiscal responsibility and prudence. We forecast a slight overall fiscal surplus of SGD3.2bn (0.4% of GDP) for FY2026. This approach would be consistent with previous first budgets at the start of a new government term.

Prioritising AI and innovation

We believe Budget 2026 will focus on leveraging technology and innovation to power Singapore’s next phase of growth. Technology and innovation are key enablers of productivity-led gains, a crucial driver that can uplift competitiveness and growth in the next decade, as the mature economy faces increasingly binding land and labour constraints, such as an ageing workforce. Digitalisation by riding the Artificial Intelligence (AI) wave is already a national priority. We expect further efforts to accelerate widespread AI adoption and transformation. Proposals to enhance the Enterprise Compute Initiative (ECI), led by Digital Industry Singapore, will potentially be considered in this year’s budget. These include providing tiered support that offers differentiated access and deployment of AI tools to companies with higher funding. Such improvements would build on the new SGD150mn allocation to the ECI from last year’s budget.

Assisting internationalisation ambitions

With Singapore’s enterprises facing an uncertain external economic landscape amid higher US tariffs and constrained by the city’s small domestic market, they are looking for opportunities to expand into new overseas markets for revenue stream growth and diversification, as well as resilient supply chains. This intention was reflected in a higher 30% share of businesses considering venturing into new markets abroad in the next 12 months, compared to 19% in the last 12 months, based on a survey by the Singapore Business Federation. To assist local firms’ internationalisation ambitions, the government could possibly extend and enhance the Market Readiness Assistance Grant beyond 31 March 2026. Policymakers have signalled that they are looking at supporting other areas of internationalisation, such as doing new products in overseas markets.

Committed to green transition

Singapore remains steadfast in its commitment to green transition and sustainability, backed by its long-term target for net zero emissions by 2050. For ongoing progress in decarbonisation, companies will have to continue building green capabilities to stay competitive in capturing this megatrend. We therefore see scope for the Enterprise Financing Scheme – Green under the Enterprise Sustainability Programme, which supports the financing of green projects, to be extended from its expiry date of 31 March 2026. Financial support was identified as a key support needed to implement sustainable business practices, based on findings from the Annual Business Survey 2025 conducted by the Singapore Chinese Chamber of Commerce & Industry.

Attracting talent and continuous upskilling

Human capital development remains a core pillar and enabler of Singapore’s growth. We expect continued government focus on nurturing and attracting talent as well as ongoing upskilling to adapt to a disruptive world, while confronting the challenges of an ageing workforce. Education is a key part of total government expenditures, ranking third behind spending on defence and health on average over the past five fiscal years.

Supporting business cashflows

As economic resilience is tested this year amid fragilities in the global economy, cashflows of businesses are likely to come under pressure. An extension of the corporate income tax rebate could be in the cards during the upcoming budget to support firms’ cashflow needs. Companies are also likely to manage costs prudently, particularly manpower-related expenses, amid economic uncertainty. However, government efforts to uplift the incomes of lower-wage workers will continue through schemes like the Progressive Wage Model (PWM) or refining the Local Qualifying Salary. Therefore, calls to enhance the Progressive Wage Credit Scheme to shoulder more of the PWM wage costs could be considered.

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