By Xinghui Kok and Jun Yuan Yong
SINGAPORE, Feb 12 (Reuters) – Singapore Prime Minister Lawrence Wong spent a big part of his budget speech on Thursday on the adoption of artificial intelligence and strengthening defence capabilities as he described the years ahead as “beset by uncertainties”.
“Events in just the first month of 2026 have already been of exceptional scale and consequence. They have increased geopolitical tensions worldwide,” said Wong, also the finance minister.
“The years ahead will be beset by uncertainties – from geopolitical tensions to cyber threats and climate risks.”
Wong said while the worst fears about the impact of U.S. President Donald Trump’s tariffs were not realised in 2025, global resilience was set to be tested far more severely this year.
Singapore’s full-year GDP growth for 2025 was 5.0%, although Wong said the overall outlook in 2026 was more moderate.
The trade ministry has forecast 2026 economic growth at 2% to 4%, and Wong said the government aims for growth at the higher end of a 2-3% range over the next decade.
Wong will also chair a new National AI Council to drive AI usage.
“It can help us overcome our structural constraints – our limited natural resources, rapidly ageing population and tight labour market,” he said, adding that AI is a factor for success in a “changed world” as the U.S. reassesses its part in global order.
Wong expects AI to transform four key sectors of Singapore’s economy: advanced manufacturing, connectivity, finance and healthcare.
BMI senior country risk analyst Lee Yen Nee called the National AI Council a “critical pivot in an era of rapid technological disruption”.
National University of Singapore political scientist Chong Ja Ian, however, said there was a need to mitigate risks associated with the heavy AI investment in case it mirrors the dotcom bubble of the 90s.
SEES FY2026 BUDGET SURPLUS AT 1% OF GDP
Singapore expects to post a budget surplus of S$8.5 billion ($6.7 billion) in the 2026 fiscal year, said Wong.
The forecast surplus for the fiscal year beginning April 1 was equivalent to about 1% of GDP, he told parliament, smaller than an expected surplus of S$15.1 billion, or 1.9% of GDP, in the current fiscal year.
Wong said he expected revenues and expenditures to keep rising, with higher corporate tax collections likely from fiscal year 2027.
Maybank economist Chua Hak Bin, however, said revenue projections are typically conservative and expects the fiscal surplus for FY2026 to come in higher.
Other announcements in the budget include additional payouts to low-income families and cash payments and vouchers to address cost-of-living concerns, and a 20% hike in tobacco tax.
Wong said Singapore could also position its carbon tax towards the lower end of the S$50 to S$80 per tonne range by 2030 if global climate momentum continues to weaken.
‘NO ONE WILL COME TO RESCUE’
Wong on Thursday said Singapore was responsible for its own defence and survival as he outlined how the world has become more dangerous with 61 state-based armed conflicts last year.
Singapore will study drone developments, including unmanned systems, he said.
“Drones are cheaper, more accessible, and increasingly sophisticated, allowing even smaller actors to project force in new ways,” he added.
Wong said Singapore was also seeing a sharp rise in cyberattacks by state-sponsored and non-state actors and will strengthen its cyberdefence capabilities.
Singapore was prepared to spend more on defence if the need arises, he said. Defence spending is currently at around 3% of GDP.
“History has taught us a hard lesson: no one will come to our rescue if Singapore faces a crisis.”
($1 = 1.2619 Singapore dollars)
(Reporting by Xinghui Kok and Jun Yuan Yong; Editing by John Mair, David Stanway and Anil D’Silva)
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