Singapore to slash CDC vouchers in Budget 2026: analysts

Only 22% of the SINGA bond borrowing cap has been utilised for new national projects.

Singapore’s national spending for the year is expected to cut back on CDC vouchers as the government shifts its focus to defence, infrastructure and artificial intelligence (AI).

“CDC vouchers will likely be scaled back from the generous quantum in FY2025 (CDC $1.06b, SG60 $2.2b) and be more targeted,” Maybank said in its latest report.

According to the company, CDC vouchers have boosted supermarkets & food courts, but even discretionary spending has picked up, including on watches & jewellery and recreational goods. Overall, retail sales jumped 4.7% during the July to November period from the 1.2% increase in the first half of 2025.

Prime Minister Lawrence Wong is set to deliver the Budget speech in Parliament on 12 February.

Maybank said this fiscal year’s (FY) spending may ramp up infrastructure investments, leveraging on low interest rates, with only 22% of the borrowing cap for SINGA bonds utilised.

Budget 2026 is seen to allocate more funding for defence spending, up from the 18.9% of total spending and 3% of gross domestic product in FY 2025. Defence could rise towards 20% of total spending over the next few years.

Manpower and cost issues will be addressed by increasing and extending the Progressive Wage Credit Scheme, extending the Senior Employment Credit and CPF Transition Offset, raising the Carbon Credit Offset Cap, and extending the Green Enterprise Financing Scheme.

“We think the DRC [dependency ratio ceiling] for the construction sector (at 83.3%) should be temporarily relaxed (over 3 years), given the pipeline of critical infrastructure and climate projects,” Maybank said.

The DBS Group Research has said that the upcoming budget is expected to increase funding for technology to fuel its next phase of economic expansion.

“The government could help firms harness AI and expand overseas by increasing and extending the enhanced Market Readiness Assistance Grant (expires 2026); Business Adaptation Grant; and Enterprise Compute Initiative (currently $150m),” Maybank said.

“The government may double down on upgrading national tech and strategic investments via National Productivity Fund and Future Energy Fund. Funds will be earmarked to develop space technologies with the new National Space Agency set up from 1 April 2026,” it added.

Maybank said it hopes the Singapore government will assist the restaurant sector, which continues to contract in 2025, either via higher DRCs or lower levies.

Meanwhile, RHB’s Global Economics and Market Strategy Report said that the 2026 budget is seen to focus funding on safeguarding job security and strengthening workforce resilience, reinforcing Singapore’s economic relevance and strategic positioning, deepening the social compact through enhanced cost-of-living support, and advancing the green transition and climate resilience.