By Jun Yuan Yong
SINGAPORE, Feb 6 (Reuters) – Singapore is expected to unveil a fiscally conservative budget next week, focusing on balancing robust growth with longer-term fiscal discipline after elevated support for households in 2025.
Bank of America, Maybank and DBS forecast an overall fiscal surplus ranging from 0.3% to 1% of GDP, with economists widely expecting the government to adopt a cautious approach amid a positive economic outlook.
The Finance Ministry will likely adopt a cautious fiscal stance due to sanguine growth conditions and anticipation demand in the economy is likely to be stronger than supply over the next few quarters, Bank of America economists said.
“We also expect Budget 2026 to pay greater attention to longer-term measures, aimed at positioning for the future. This contrasts with Budget 2025, which was more “household friendly” than usual amid earlier concerns over the growth outlook,” they said.
Similarly, BMI analysts expect the government to reduce cash transfers to households in 2026 following “elevated support” in 2025.
As the government is required to balance the budget over each parliamentary term – the latest of which began after the 2025 general election – economists expect fiscal prudence to be prioritised early to preserve room for support measures should conditions deteriorate later.
Singapore’s budget and economic forecasts will show to what extent tariffs and supply chain disruptions in major economies have affected business activity and key sectors in the financial hub and trade-reliant economy.
The budget will be announced on February 12 by Prime Minister and Finance Minister Lawrence Wong at 3:30 p.m. (0730 GMT).
Singapore’s economy grew by a faster-than-expected 4.8% in 2025, according to advance estimates, but Wong flagged earlier challenges to sustaining that pace of growth this year. The Trade Ministry previously forecast growth of between 1.0% to 3.0% in 2026.
In January, the Monetary Authority of Singapore raised its core and headline inflation forecast to between 1.0% and 2.0%, from 0.5% and 1.5% in October.
INNOVATION AND PRODUCTIVITY
The central bank also expects the global AI-led investment that buoyed Singapore’s growth last year to be sustained in 2026 as demand continues to outpace supply.
DBS economist Chua Han Teng expects the government to invest in technology and innovation as the nation’s economy faces “increasingly binding land and labour constraints, such as an ageing workforce”.
In January, the government released an update as part of its Economic Strategy Review, which stressed the need to direct national research and development resources towards high-value industry sectors, pursue emerging technologies in the areas of quantum, decarbonisation and space technologies, and “aggressively” support leading local firms to internationalise.
Singapore also announced an investment of more than S$1 billion ($779 million) in public AI research through 2030.
Maybank economist Chua Hak Bin expects the government to focus on supporting AI adoption and upgrading national tech investments through existing funds.
He added that the government could provide more incentives to encourage firms to hire as the youth structural unemployment rate reaches a four-year high.
According to preliminary data from the Manpower Ministry, the citizen unemployment rate edged up to 3.0% in 2025, from 2.9% in 2024.
Bank of America analysts said that they will also be paying attention to Singapore’s corporate income tax collections, which have increased by 1 to 4 percentage points of GDP since 2023 despite ongoing uncertainties surrounding global tax reforms.
They highlighted that Nvidia’s annual revenue booked in Singapore surged 10 times to $23.7 billion in the 12 months ending January 2025 from January 2023 figures, while both Google and Amazon have invested significantly in the nation to expand their cloud services.
(Reporting by Jun Yuan Yong; Editing by Jacqueline Wong)
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