Click here to read the full report.

We view Budget 2026 as a strategic, forward-looking plan that sharpens Singapore’s economic competitiveness and strengthens the social compact under the Forward Singapore agenda, underpinned by fiscal discipline. By laying out the policy toolkit to advance the long-term direction and recommendations in the Economic Strategy Review (ESR) Mid-term Update, it positions Singapore to better navigate an increasingly complex and fractured global landscape amid domestic constraints. At the same time, continued social support aims to strengthen inclusion. We highlight six key takeaways.

1. Leveraging artificial intelligence (AI)

AI, featured prominently within the seven recommendations of the ESR Mid-term Update, is a major focus in Budget 2026. Key policies in the budget aim to leverage technology to power Singapore’s next phase of economic growth. We believe harnessing AI effectively across the economy will boost productivity – a crucial driver of competitiveness and growth over the next decade – as Singapore’s mature economy faces increasingly binding land and labour constraints.

Co-ordinated efforts, including the formation of a National AI Council chaired by the Prime Minister, new national AI Missions across four strategic sectors, and the establishment of an AI park, aim to position Singapore strategically as a global AI leader, driving innovation while enabling effective and targeted deployment of AI at greater scale and speed. A notable enhancement is expanding the Productivity Solutions Grant (PSG), which has been key in helping small and medium-sized enterprises (SMEs) implement digital and automation solutions to raise productivity over the years. Expanding the PSG to allow firms of any size to access AI-enabled tools will help to defray AI adoption costs and therefore incentivise enterprise-wide adoption, particularly among SMEs, which have lagged large corporates. Building an AI-ready workforce will also be a key ingredient for broad-based AI utilisation across the economy. To encourage wide-spread learning, familiarity, and usage of AI, Singaporeans who undergo selected training courses will receive six months of free access to premium AI tools, supported by a redesigned SkillsFuture website to help learners better identify suitable AI courses

2. Spurring internationalisation and increasing capital availability

Strengthening connectivity and aggressively supporting internationalisation is another key recommendation in the ESR Mid-term Update. Enhanced internationalisation schemes, such as the Market Readiness Assistance Grant and the Double Tax Deduction for Internationalisation scheme, will support the ambitions of Singapore enterprises, as they aim to expand into new overseas markets and diversify revenue streams for greater growth, as well as build resilience amid global uncertainty and a limited domestic market. This internationalisation momentum is evident, with around eight in 10 SMEs planning overseas expansion in 2026, according to a recent DBS Business Pulse Check survey.

The ESR Mid-term Update also recommends sustaining a vibrant startup ecosystem through increased enterprise capital availability. Various enhancements and top-ups to the Startup SG Equity Scheme (SGD1bn), the Anchor Fund (SGD1.5bn), and the Financial Sector Development Fund (FSDF) (SGD1.5bn) broaden access to funding from private to public markets, supporting companies’ growth ambitions. Boosting the Equity Market Development Programme (EQDP) via the FSDF will add impetus to the ongoing revival of the public equities market.

3. Committed to green transition

Budget 2026 reaffirms Singapore’s steadfast commitment to the green transition and sustainability. The city continues to make progress towards its long-term target for net zero emissions by 2050. The government is therefore raising the 2030 solar deployment target to 3 gigawatt-peak, after reaching the target of 2 gigawatt-peak well ahead of schedule. It also reiterated its goal of achieving 100% cleaner energy vehicles by 2040. The extension of the Energy Efficiency Grant and green loans support under the Enterprise Financing Scheme will provide businesses with key financial support to adopt green solutions.

4. Alleviating business cashflows and costs

With economic resilience still possibly likely to be tested this year amid external uncertainty, the government will provide a slightly reduced corporate income tax rebate, which we expect to continue supporting firms’ cashflow needs. Companies are also likely to be prudent on cost management, particularly manpower-related expenses. In this regard, enhancements/extensions to various schemes, such as the Progressive Wage Credit Scheme, the Senior Employment Credit, and the CPF Transition Offset, will help shoulder wage costs, amid efforts to uplift lower-wage workers and encourage the continued employment of senior workers.

5. Strengthen social compact

Government efforts to strengthen the social compact by mitigating inequality and strengthening inclusion are evident in the budget policies. Key initiatives include raising the Local Qualifying Salary to uplift the incomes of lower-wage workers, increasing the monthly household income threshold for pre-school education subsidies, and enhancing the ComLink+ Progress Packages for families. The latest round of targeted assistance, including cash payments, U-Save rebates, and CDC vouchers, builds on earlier support frameworks and provides timely cushion and relief to households facing ongoing cost pressures.

6. Strong fiscal position

Budget 2026, the first fiscal plan of the new term of government, strikes a balance between calibrated, targeted policy support and fiscal discipline. The government’s budgeted overall fiscal surplus of SGD8.5bn (1.0% of GDP) for FY2026 marks the third consecutive year of surplus, extending the positive public financial performance of recent years, even amid increased focus on various spending priorities. The fiscal impulse is assessed to be mildly expansionary in FY2026.

Click here to read the full report.

Chua Han Teng, CFA

Senior Economist - Asean

[email protected]