Singapores 2026 Budget Plan: From Livelihood to AI, Five Key Policies from Prime Minister Lawrence Wongs Speech
Images from the annual budget speech by Lawrence Wong, Prime Minister and Minister of Finance of Singapore, have once again drawn global attention to Singapore. In this more than one-hour address, Wong outlined a national strategic roadmap and plans to increase funding in key areas to steer the country through various challenges.
These include cost of living, business tax reductions, new welfare measures, additional cost-of-living support, significant investments in education and low-income labor, as well as heavy investment in technology—especially AI—as a driver for business and economic growth, paving the way for Singapore's next development phase.
Summary of five key policy directions from the Singapore Prime Minister’s speech, covering livelihoods, security, and AI.
1. Accepting the new reality: the old world order has ended.
Wong was among the first national leaders to openly address changes in free trade systems and the global order following President Trump's tenure and related trade tensions. He candidly acknowledged that the era of stability under U.S. leadership has ended, global trade rules are being disregarded, and the world is entering a more fragmented and dangerous phase. Standing still is not an option; adaptation is necessary for survival in this new world order.
- Singapore must protect itself. Wong discussed maintaining defense spending at about 3% of GDP, with readiness to increase if necessary, and enhancing cybersecurity capabilities to counter threats from both state and private actors.
- He emphasized building partnerships with businesses to safeguard critical infrastructure and investing in next-generation military technologies.
Despite many countries turning inward, Wong sees globalization evolving (Re-globalization) into selective alliances prioritizing security over cost-effectiveness. Singapore plans to expand connections with new markets such as Latin America, Africa, and the Middle East, while strengthening ties with neighboring countries.
2. Betting on AI as the nation’s core.
Wong made clear that AI adoption will be a strategic advantage to address structural challenges like limited natural resources, a rapidly aging population, and a tight labor market.
- Singapore focuses on practical AI deployment rather than leading-edge model development. The goal is to be a trusted hub for rapid and efficient AI solution development, testing, and application.
- He announced the "National AI Missions" to drive transformation in four key sectors: advanced manufacturing, connectivity and logistics, finance, and healthcare.
- The "National AI Council," chaired by the Prime Minister, will set strategy and coordinate research and regulations to ensure aligned progress across sectors.
- Financial incentives are in place to make AI accessible to businesses of all sizes, such as the Champions of AI program supporting companies transforming their entire operations with AI, including organizational restructuring and workforce skill development.
- Tax deductions for AI investments include the Enterprise Innovation Scheme allowing 400% tax write-offs up to $50,000 annually, and the Productivity Solutions Grant (PSG) supporting AI-driven tools to help SMEs automate.
- The RIE 2030 (Research, Innovation and Enterprise) initiative will invest over $37 billion in advanced technologies like Quantum Technology and Semiconductors.
- Higher education institutions will reform curricula to strengthen AI skills alongside academic rigor, adjusting courses and fields of study, and granting free access to premium AI tools for graduates of designated AI programs.
3. Business tax cuts and capital injection to fuel overseas growth.
To support businesses, the government focuses on short-term cost reduction combined with capital injection for growth.
- Corporate income tax rebates of 40% for the 2026 assessment year will be provided. Companies employing at least one local employee earning a minimum of $1,500 will receive rebates up to $30,000 to improve liquidity.
- An additional $1 billion will be allocated to the Startup SG Equity fund to expand investments into growth-stage companies.
- The Anchor Fund will receive an extra $1.5 billion to attract quality companies to list on the Singapore Exchange (SGX).
- Funding support for companies expanding abroad will increase, with SMEs eligible for up to 70% assistance and general companies up to 50%.
- The cap on Double Tax Deduction for overseas activities will rise to $400,000 from the previous $150,000.
4. Wage increases to support low-income workers and attract foreign labor.
Labor policies focus on raising incomes alongside lifelong learning system reforms.
- The Local Qualifying Salary (LQS) minimum wage for full-time local employees in companies employing foreigners will increase from $1,600 to $1,800.
- The Progressive Wage Credit Scheme (PWCS) will provide higher employer wage support, with the government covering 30% of wage increases this year and extending the program through 2028.
- SkillsFuture Singapore and Workforce Singapore agencies will merge into a single entity to offer one-stop services covering skills training and job placement.
- The "Level-Up" program will support AI and mid-career skills development by providing financial support during training leave.
- The Senior Employment Credit program will extend to 2027 to encourage employers to retain older workers.
Additionally, the government will tighten foreign worker screening to maintain labor market quality and balance, raising minimum salary thresholds for foreigners to ensure only highly qualified individuals enter, aligning with rising local wages—Employment Pass minimum raised to $6,000 and S Pass to $3,600.
5. Conditional welfare measures to ease cost of living and combat inflation.
Acknowledging ongoing cost pressures despite slowing inflation, the government focuses on short-term relief and conditional welfare to help citizens remain resilient amid uncertainty.
- The ComLink+ model provides additional conditional support (Social Contract) to low-income families meeting targets such as stable employment or consistent school attendance, with government contributions in cash and CPF funds totaling up to $10,000 annually.
- One-time cash cost-of-living support of $200–$400 will be given to Singaporeans with assessable income not exceeding $100,000 and owning no more than one property.
- CDC Vouchers worth $500 will be distributed in 2027 to 1.4 million households for use at supermarkets and community stores.
- U-Save utility rebates of up to $570 will be provided for HDB households.
Family and elderly support measures include Child Life SG credits of $500 into Child Development Accounts for Singaporean children under 12, cash top-ups up to $1,500 to retirement accounts for Singaporeans aged 50+ with low savings, and increased CPF contribution rates for older employees to boost retirement savings.
Wong emphasized that despite extensive cost-of-living support, fiscal discipline remains paramount. The 2025 budget is projected to have a slight surplus of 1.9% of GDP, ensuring that defense and financial self-reliance are sustainably funded without burdening future generations.
Ultimately, the 2026 budget is not merely a spending plan but a commitment to strengthening social bonds, investing in security and the future, and building a safe, sustainable, and equitable nation for generations to come, Wong concluded.
“Though the world faces uncertainties—from geopolitical tensions and cyber threats to climate risks—we will confront these challenges with resilience. Singapore's true strength lies not only in policies but in the spirit of its people. We have overcome crises by standing united as one,” Wong said in closing.
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