The Dollars & Cents: Budget 2026

Credit to Unsplash: Kyle Pangan

In this Explainer, find out…

1. What local and international factors shaped Budget 2026?

2. How is the Singapore Government supporting key growth areas through Budget 2026?

3. What are the potential risks of Budget 2026 for Singapore?

Introduction

As Prime Minister Lawrence Wong said, the next phase of Singapore is unfolding amid “profound global change”. Our world is entering tumultuous times. Amidst growing multipolarity and the breakdown of a rules-based world order, Singapore must continue refining its fiscal strategy to prepare Singaporeans for the challenges ahead. 

The Singapore Government has identified various pillars for growth and support, in line with the challenging obstacles ahead. Cost-of-living concerns, artificial intelligence (AI) stewardship, as well as business expansion strategies remain key priorities in this year’s Budget.

This Policy Explainer aims to examine the contents of Budget 2026, as well as the broader implications of the Budget in securing Singapore’s future. 

The Current State of the Budget

In Budgets 2024 and 2025, there were strong emphases on social support. Prominently, generous cost-of-living payouts were disbursed to help households regain stability and reduce societal inequality in the post-pandemic era.

For this year’s Budget, there has been a strategic shift towards strengthening Singapore’s long-term competitiveness. While cost-of-living support remains a priority, a key focus is on equipping Singaporeans for a world where AI is increasingly prevalent, and enabling enterprises to expand globally.

In the next section, we will begin by outlining key challenges facing Singapore. In doing so, key objectives that have come to shape Budget 2026 will be outlined in broad terms.

Major Problems Facing Singapore and the World

Rising Cost-of-Living

Cost-of-living concerns are not unique to Singapore. Globally, this phenomenon is a polycrisis (a collision of several global forces). Trade wars and supply chain shocks have resulted in disruptions, causing additional costs to be passed down to consumers.

In an Institute of Policy Studies survey, cost-of-living was voted as the top concern amongst voters in the 2025 Singaporean General Election. With a startling 60 per cent of Singaporeans living paycheck-to-paycheck, this signals a worrying trend of diminishing financial resilience in one of the world’s most expensive cities. Therefore, Budget 2026’s monetary support aims to:

1. Cushion the impact of inflation and the rising costs for essential items; and

2. Provide specific life-stage support for Singaporeans to tide over uncertain times.

Prominence of AI

Globally, there is a consensus that AI is here to stay. AI’s potential to enhance national productivity has solidified it as a key priority for future development. Nonetheless, AI has also compounded fears of automation, and the very real threat of entire industries being replaced. The Government therefore aims to achieve a few objectives. This includes:

1. Encouraging the adoption of AI across industries; and

2. Providing educational opportunities for Singaporeans to use AI effectively.

Growing Pool of International Talent

Globalisation has led to stiffer competition for jobs locally, with jobs being displaced and outsourced to regions where costs are lower and manpower is more readily available. From the Government’s standpoint, their most immediate priorities would be to: 

1. Encourage upskilling amongst the local workforce to compete globally; and

2. Attract highly-skilled foreign talent for Singapore to remain globally competitive.

Remaining Relevant and Competitive

As recognised in Singapore’s Economic Strategy Review, Singapore’s relevance to the global economy hinges on it being a trusted hub in an increasingly fragmented world. Rather than passively responding to global trends, Singapore must proactively drive industry leadership in key sectors, such as semiconductors, healthcare, and finance. Key strategic priorities include:

1. Supporting local enterprises in international expansion to strengthen their global presence; and

2. Equipping the workforce with industry-relevant skills to meet evolving sectoral demands.

What is in Budget 2026?

Given the above challenges and needs, we will now seek to outline specific national strategies introduced in Budget 2026.

Cost-of-Living Support

All Singaporean households will receive S$500 in Community Development Council (CDC) Vouchers, usable at heartland merchants and supermarkets. Eligible adult Singaporeans will also get a one-off cash payout of S$200 to S$400 in September 2026, which is determined by residence value. U-Save rebate vouchers will also be distributed to Singaporean households to offset utility bills. Additionally, enhanced subsidies through the Kindergarten Fee Assistance Scheme (KiFAS) and the KiFAS Startup Grant support low- and middle-income families by reducing preschool fees.

Together, these payouts will provide cash relief for households to cushion the impact of inflation and rising costs of living. Such vouchers have been shown to increase household spending, thus supporting small business revenue and sustaining consumption in the local economy. These targeted supports aim to bolster social stability and public confidence. They are part of a broader strategy to promote stability and inclusivity in Singapore’s social compact.

AI Readiness

Singapore’s AI readiness strategy revolves around two key strategies:

1. The Champions of AI Programme; and

2. The National AI Council. 

The Champions of AI Programme aims to support ambitious firms in integrating automation processes to enhance their competitiveness. This targets priority industry sectors, such as finance, advanced manufacturing, healthcare and connectivity. Accordingly, the program will issue financial incentives through the Productivity Solutions Grant, Enterprise Innovation Scheme, and the construction of an AI Park. Ultimately, the programme aims to develop more successful Singaporean enterprises that use AI meaningfully. It also encourages broader AI adoption across industries.

The creation of the National AI Council fulfills a distinct but complementary purpose. Chaired by Prime Minister Lawrence Wong, it will review existing laws for companies to prototype AI solutions, without navigating complex bureaucracy. The National AI Council is also involved in defining the ethics of AI regulation, to prevent the misuse of data and address privacy concerns. Additionally, the National AI Council has also been involved in creating digital pop-up spaces such as the Lorong AI co-working space, with future plans for an AI Park in one-north. 

Figure 1: Lorong AI, a collaborative hub for AI development and exchange in Singapore

Business and Economic Growth

For Budget 2026, Singapore is bolstering support for local enterprises to internationalise and expand operations. Prominently, they include the 40 per cent Corporate Income Tax (CIT) Rebate, an increase in the Double Tax Deduction for Internationalisation (DTDI) from S$150,000 to S$400,000, and a billion dollar top-up to the Startup SG Equity Scheme. These incentives can be grouped into short-, medium- and long-term strategies. 

CIT rebates provide short-term relief to help businesses manage operating and restructuring costs. On the other hand, the DTDI enhancement provides a medium-term incentive for internationalisation through a 200 per cent tax deduction on expansion expenses. Effectively, for every S$1 a local enterprise spends on qualifying overseas expansion activities, S$2 will be deducted from the local enterprise’s taxable income. For the long term, the Startup SG Equity Scheme provides cash flow to enterprises, in hopes of encouraging private sector investment. It aims to target Deep Tech companies to anchor high-value industries through increased private sector collaboration and scaling support.

Labour Market Adjustments

There were also a few changes to labour policies to help quell growing fears of unemployment. Foremostly, the main changes to

1. the Progressive Wage Credit Scheme; 

2. the qualifying salary for Employment Pass and S Pass; and

3. upskilling support

highlight the Government’s support for the local workforce.

First, more help will be provided to help firms manage the rising costs of wages. Under the Progressive Wage Model, employers’ costs increase as worker’s wages increase. In turn, the Government has helped to mitigate a proportion of this cost by funding some of this increase. Budget 2026 enhances this effort as the previously planned 20 per cent for 2026 will be increased to 30 per cent. This same 30 per cent will apply in 2027, before falling back to 20 per cent in 2028.

Second, there will also be a rise in the Employment Pass and S Pass qualifying salaries, from S$5600 to S$6000 for Employment Pass (Financial Services Sector increased from S$6200 to S$6600), and S$3300 to S$3600 for S Pass (Financial Services Sector increased from S$3800 to S$4000). These provisions maintain a high quality workforce by introducing a complementary foreign workers talent pool. They ensure that foreign professionals entering Singapore have high skills and can command higher salaries. At the same time, it also nudges companies to prioritise locals for entry-level jobs while attracting highly-skilled foreign talent. 

Third, in terms of upskilling support, the Workfare Skills Support helps lower-skilled workers by providing training allowance and cash incentives. This is especially important in the AI era, where skills can become outdated quickly and workers must keep learning. 

Potential Risks

Despite the comprehensive range of support measures being rolled out, one might expect persisting risks. We explore two such possibilities here, focusing on cost-of-living support and AI policies.

Cost-of-Living Support

Cost-of-living support is socially important as it helps households cope with rising expenses. However, when transfers are repeated frequently, households may expect continued help over the long term. Over time, this raises questions about whether such assistance can remain fiscally sustainable. Survey evidence suggests such expectations may already be emerging. A YouGov survey found that 86 per cent of Singaporeans believed the Government can do more to address rising living costs, and only 13 per cent felt current support was enough. Over time, such expectations may make it politically difficult to withdraw support once inflation subsides. Eventually, this could limit fiscal flexibility. The Government therefore faces the challenge of providing temporary relief without normalising permanent subsidies.

AI Policies

Singapore’s strong AI push raises the question of whether its benefits will reach everyone or just the leading firms. Large, capital-intensive firms are better positioned to benefit from AI because they more often have in-house technical expertise and the financial capacity to absorb experimentation costs. Such advantages allow them to exploit AI tools more fully. In contrast, many SMEs face higher upfront investment costs, limited access to AI talent and unwillingness to try out AI tools.

According to a study conducted by the Infocomm Media Development Authority of Singapore, only 14.5 per cent of SMEs adopted AI, compared to 62.5 per cent of non-SMEs. Separately, SMEs used AI in an average of three functions while non-SMEs used AI in about five functions. This suggests that larger firms are not only more likely to adopt AI but are also able to apply it more widely across their operations.

If these structural differences persist, AI adoption policies in Budget 2026 may disproportionately benefit advanced firms. Hence, they could widen gaps in productivity and growth due to structural constraints. If productivity gains are uneven, some sectors may pull ahead while others lag. This creates wage and competitiveness gaps which undermine inclusive growth.

Conclusion

To sum up, Budget 2026 builds upon the foundations from previous years’ Budgets, to prime Singapore for a volatile and uncertain future.

In Budget 2026, support schemes help Singaporeans with rising living costs. Concurrently, the Government is also encouraging local enterprises to internationalise and expand overseas for greater market expansion. AI will also be a key leveller for the future, as seen through the creation of the Champions of AI Programme, in a bid to enhance national productivity and competitiveness. 

Nonetheless, despite a prudent financial surplus in the Budget, Singapore must not rest on its laurels. To build a future-ready and inclusive economy, there needs to be continuous refinement and engagement in addressing short-term challenges, while pushing for long-term growth. 

MAJU_PE_09_The Dollars & Cents: Budget 2026.

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This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation. 

By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.

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