Fiscal Performance and Overview
Singapore delivered a robust fiscal performance in FY2025, recording an overall surplus of S$15.1 billion, representing 1.9% of its GDP. This figure significantly exceeded the initial estimate of S$6.8 billion, primarily driven by higher-than-expected corporate and personal tax revenues totalling S$8 billion above projections. The strong performance occurred while expenditure and net investment returns remained within budgetary limits. For FY2026, the government projects a more moderate surplus of S$8.5 billion, equivalent to 1% of GDP.
Strategic AI Investment Initiative
The FY2026 budget marks a decisive strategic shift toward artificial intelligence development. This substantial investment encompasses research expenditure, tax deductions, and AI-related grants designed to transform four key economic sectors. The initiative includes establishing a National AI Council and expanding AI workforce training programs to address Singapore’s structural challenges, including natural resource constraints, an aging population, and tight labour market conditions.
Equity Market Enhancement Measures
Singapore’s commitment to strengthening its capital markets is evident through several significant funding allocations. The government announced a S$1.5 billion top-up for the Equity Development Program (EQDP), bringing total funding to S$6.5 billion, with the next batch of EQDP managers expected to be appointed by mid-2026. Additionally, a second S$1.5 billion Anchor Fund has been established specifically for pre-IPO financing to support high-quality public listings. The introduction of life-cycle funds will provide CPF contributors with enhanced equity exposure, further deepening retail participation in capital markets.
Sector-Specific Impacts
The budget’s AI emphasis is expected to particularly benefit IT service providers and the data centre ecosystem, as increased AI adoption drives demand for computational infrastructure. Defence spending continues its upward trajectory with FY2026 allocation reaching S$24.9 billion, representing a 6.4% increase from the previous year’s S$23.44 billion. The construction sector faces increased labour costs as foreign worker levies rise by S$100-150 monthly, while minimum wages increase to S$1,800 from S$1,600, with implementation scheduled for 2028.
Frequently Asked Questions
Q: What was Singapore’s fiscal surplus performance in FY2025?
A: Singapore achieved a fiscal surplus of S$15.1 billion (1.9% of GDP) in FY2025, more than double the estimated surplus of S$6.8 billion, primarily due to S$8 billion higher revenue from corporate and personal taxes.
Q: How much is Singapore investing in AI development?
A: The government is committing toward AI development through research spending, tax deductions, AI-related grants, transformation across four key sectors, establishing a National AI Council, and expanding AI workforce training.
Q: What equity market initiatives were announced in Budget 2026?
A: Key initiatives include a S$1.5 billion top-up for the EQDP (bringing total to S$6.5 billion), a S$1.5 billion Anchor Fund for pre-IPO financing, and life-cycle funds providing CPF contributors with greater equity exposure.
Q: Which sectors are expected to benefit most from the AI focus?
A: IT service providers and the data centre ecosystem are expected to be primary beneficiaries due to increased demand for computational infrastructure to support AI and token activity.
Q: How much is defence spending increasing in FY2026?
A: Defence spending is budgeted to increase 6.4% to S$24.9 billion in FY2026, following a 12.4% increase to S$23.44 billion in FY2025.
Q: What changes are coming to foreign worker policies?
A: From 2028, levies for basic-skilled workers in marine and process sectors will increase by S$100 and S$150 respectively, and minimum wages for full-time foreign workers will rise from S$1,600 to S$1,800 monthly.
Q: What household support measures were announced?
A: S$500 CDC vouchers will be distributed to 1.4 million Singaporean households in January 2027, along with S$200-S$400 cost-of-living payments for households with income below S$100,000.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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