By Xinghui Kok and Jun Yuan Yong
SINGAPORE, Feb 12 (Reuters) - Singapore expects to post a budget surplus of S$8.5 billion ($6.7 billion) in the 2026 fiscal year, Prime Minister Lawrence Wong said in his budget speech on Thursday as he warned that the global economy could still be tested by the impact of tariffs.
The forecast surplus for the fiscal year beginning April 1 was equivalent to about 1% of GDP, he told parliament. That was smaller than an expected surplus of S$15.1 billion, or 1.9% of GDP, in the current
fiscal year.
Wong, who is also the city-state's finance minister, said he expected revenues and expenditures to keep rising, with higher corporate tax collections likely from fiscal 2027.
Wong said while the worst fears about the impact of U.S. President Donald Trump's tariffs were not realised in 2025, the resilience of the global system was set to be tested far more severely this year.
"Events in just the first month of 2026 have already been of exceptional scale and consequence. They have increased geopolitical tensions worldwide," Wong said.
Data this week showed Singapore's full-year GDP growth for 2025 was 5.0%, a better-than-expected outcome, and Wong said while some positive momentum had continued into this year, the overall outlook was more moderate.
The trade ministry has forecast 2026 economic growth at 2% to 4%, and Wong said the government's ambition was for the rate to stay at the higher end of a 2% to 3% range over the next decade.
"The years ahead will be beset by uncertainties - from geopolitical tensions to cyber threats and climate risks," he said.
AI DRIVE, DEFENCE SPENDING
The Prime Minister said he would chair a new AI council that would drive Singapore's artificial intelligence agenda, with regulations to be reviewed and capacity created for companies to test AI innovations.
AI missions would drive transformation in key sectors, with a focus on advanced manufacturing, connectivity, finance and healthcare, and the government would align research and development, regulation and the promotion of investment, Wong said.
Defence spending was expected to remain at around 3% of GDP, but Wong said the government was prepared to spend more, saying Singapore was responsible for its own defence.
He said the country was studying drone development, including unmanned systems, and would invest decisively.
"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 and David Stanway)
