Budget 2026 to surge tech funding as ageing workforce squeezes growth: analysts

Binding land and workforce shortages now force a radical productivity-led growth strategy.

Singapore is expected to allocate more funding to technology to fuel its next phase of economic expansion.

“Technology and innovation are key enablers of productivity-led gains, a crucial driver that can uplift competitiveness and growth in the next decade, as the mature economy faces increasingly binding land and labour constraints, such as an ageing workforce,” said Chua Han Teng, senior economist at DBS Group Research.

Prime Minister Lawrence Wong is set to deliver the Budget speech in Parliament on 12 February. Various groups have laid out their budget wishlist after a public consultation was made to gather views across several themes, such as strengthening the economy through entrepreneurship, competitiveness, and AI adoption.

According to Chua, Singapore is seen to accelerate the adoption of artificial intelligence (AI) and transformation. The city-state currently has over 60 AI Centres of Excellence set up by leading corporations, citing data from the Ministry of Digital Development and Information.

He noted that the Singapore Digital Economic Report 2025 showed that AI adoption amongst enterprises rose in 2024 from 2023, but was uneven across sectors and company types. Small businesses lagged, with AI adoption only at 14.5% whilst largers firms were at 62.5%.

“Proposals to enhance the Enterprise Compute Initiative (ECI), led by Digital Industry Singapore, will potentially be considered in this year’s budget. These include providing tiered support that offers differentiated access and deployment of AI tools to companies with higher funding,” the expert noted.

“Such improvements would build on the new $150m allocation to the ECI from last year’s budget. Building an AI-ready workforce will also be a key ingredient for broad-based AI utilisation across the economy. The budget’s efforts would complement the additional public investment of over $1b in the National AI Research and Development Plan from 2025 to 2030,” he added.

Deloitte has earlier recommended targeted support under the 2026 spending plan to build AI readiness, including a dedicated fund for medium-sized enterprises.

The company also said policies to attract and retain specialised research and development (R&D) talent are needed. This includes possible special income tax rates for experts in areas such as AI and semiconductors, and clearer, more streamlined R&D incentives that better support collaborative projects.

Chua said this year’s spending plan is also expected to feature R&D-led innovation. This is in line with the economy’s efforts to sharpen its competitive edge as a knowledge-based economy and advance its growth frontier.

“Continued innovation will be underpinned by the Research, Innovation, Enterprise 2030 (RIE2030) Plan, launched in December 2025. The government commits to investing $37b in R&D under RIE2030 over the next five years from April 2026,” he said.

“The innovation priorities will be centred around strategic sectors of the future, addressing secular global megatrends and challenges, enabled by capabilities such as AI, and data and compute,” he added.