Strong finances give S’pore a strategic advantage in an uncertain world: PM Wong

SINGAPORE - In a volatile world where smaller countries risk being bypassed, the Republic must adapt its economic strategies to keep growing and to create opportunities for all Singaporeans, Prime Minister Lawrence Wong said on Feb 26.

Rounding up a three-day debate on his Budget statement, he also emphasised that Singapore’s strong fiscal position is a strategic advantage in an uncertain world, providing the city state with the wherewithal to invest in its economy and people.

A sound and progressive system of taxes and spending is how the country has weathered past storms, said PM Wong, who added that the Government will stay disciplined and continue to balance its Budget to protect the nation’s long-term resilience.

In an hour-long speech to the House, PM Wong also responded to points raised by the 67 MPs who spoke before him, including on Singapore’s record $15.1 billion Budget surplus for the 2025 financial year and the national artificial intelligence push, a central pillar of the country’s record $154.7 billion Budget for the 2026 financial year.

PM Wong said Singapore has felt acutely the pressures of a world where power and strength increasingly shape outcomes, particularly after the US announced its so-called Liberation Day tariffs in April 2025.

In this changed world, the city state will diversify its links while deepening trusted partnerships. Crucially, it will establish leadership in key domains to create “distinctive value that others cannot easily replicate”, he added.

This means staying at the frontier in advanced manufacturing, finance, digital services and new growth sectors through heavy investments in research and development, and by anchoring cutting-edge investments in the Republic.

At the same time, the relationship between growth and jobs has grown more complex compared with the past, when economic expansion usually led to increased hiring.

PM Wong noted that the global trend among leading firms has been towards highly automated facilities, even “dark factories” with minimal human presence. In Singapore, manufacturing has contributed about one-fifth of gross domestic product (GDP) over the past decade, yet its share of employment has fallen from 14 per cent to 12 per cent.

“Does that mean that growth is no longer important? Far from it – growth is essential,” he said. “It creates new opportunities, raises wages and generates the resources we need as a society.”

Frontier industries, in particular, anchor Singapore’s enterprise ecosystem and drive demand across the rest of the economy, he said. “Without sustained growth, and especially growth at the frontier, investments will go elsewhere, capabilities will erode, wages will stagnate and Singapore risks a real decline.”

But growth alone will not automatically lead to job opportunities across all sectors, which is why Singapore must uplift the broader domestic economy, said PM Wong.

This means raising productivity, wages and career pathways across the services sector, and is why the Government is taking sustained action in areas such as education, healthcare and social services.

This includes putting in place skills frameworks that build competencies, enable skills upgrading and support structured progression. PM Wong also pointed to increased salaries for workers in public healthcare institutions and government-supported pre-schools, as well as updated salary guidelines for the community care and social service sectors.

“These are not ad hoc or one-off moves – they are integral to our economic strategy, because inclusive growth means more than developing frontier industries,” he said.

“It also means ensuring that domestic services – services that Singaporeans rely on daily – become more productive, more professional and more attractive as careers.”

To MPs’ questions on Singapore’s fiscal surplus exceeding projections in recent years, PM Wong said this was not due to the Government being overly conservative in its forecasts, and that the country’s forecast deviations are within a reasonable range comparable with those of other advanced economies.

While the projections are prepared by Ministry of Finance economists using the best available data at the start of each financial year, the reality is that actual growth outcomes can be very different as Singapore is so dependent on the external environment, he added.

“Forecasting Singapore’s GDP growth is like forecasting the world’s GDP growth, which is very, very difficult to do,” he said. “Likewise, revenues from property transactions or COE (certificate of entitlement) premiums are inherently difficult to predict.”

PM Wong also responded to WP chief Pritam Singh’s remarks that the PAP Government’s decision to dissolve Parliament just days after the Trump administration announced its tariffs was a calculated move to put the ruling party in the most advantageous position.

The insinuation, he said, is that the PAP Government had deliberately painted a “doom and gloom picture” for electoral advantage.

The facts were that following the US’ Liberation Day tariffs, there was widespread uncertainty across the world, and nobody projected that Singapore’s GDP would grow by 5 per cent in 2025.

That things did not turn out as badly as feared was partly due to the decisive steps the Government took, said PM Wong. These included engaging the US to safeguard the Republic’s core interests, deepening links with other countries, and forging new agreements that sustained investor confidence.

Agencies, businesses and workers here also adapted swiftly and worked tirelessly through a very uncertain period, he added.

“Their efforts deserve recognition, so let us not belittle these contributions just to score a political point,” PM Wong said. “The fact that we are in a better position today than our projections is something we should all welcome – it’s good news for Singapore, and Singaporeans.”

PM Wong also responded to Mr Gerald Giam (Aljunied GRC), who had called for the GST hike to be re-evaluated in the light of the Government’s fiscal surpluses.

The Prime Minister said that at the start of the decade, the Government knew healthcare spending would rise sharply in line with the rapidly ageing population, and this would be a structural, not cyclical, change in spending pressures.

In the end, the goods and services tax was the only broad-based and sustainable option to fund rising healthcare needs while preserving the reserves framework. While the Government raised the GST rate, it also ensured the effective tax increase for the majority of Singaporean households was delayed by at least five years, said PM Wong.

In 2022, when this decision was made, there was no sign that corporate income tax collections would rise significantly, he added, noting that such revenues rose from the end of the 2023 financial year on the back of GDP growth outperforming expectations.

In the medium term, the Government expects structural increases in corporate income taxes due to global changes in global minimum tax rules.

These additional revenues will strengthen Singapore’s fiscal position and support growing spending needs – such as for social needs, economic competitiveness, energy transition and security – without negating the need for GST, he said.

The Prime Minister emphasised that the Government’s aim is not to run high surpluses, but to continue to have a balanced budget over the term of government, which the historical record bears out.

Whenever there have been revenue upsides, the Government has shared some of the gains with Singaporeans, said PM Wong, such as through the SG60 package in 2025, as well as Central Provident Fund top-ups and the Cost-of-Living Special Payment in Budget 2026.

Fundamentally, the question is who pays tax and who benefits from government transfers. On this score, the picture is clear, said PM Wong: Workers in the top income quintile get back 20 cents in benefits for every dollar of tax they pay, while for someone in the bottom quintile it is $7 in benefits.

“Our fiscal system is fair, progressive and sustainable,” he added. “It is pro-worker, pro-enterprise and pro-Singapore.”

PM Wong said the next phase will not be easy for Singapore, given the economic headwinds and more contested geopolitical environment.

But the Republic has navigated uncertainty before, and emerged with its sovereignty and independence intact because it stayed united as a people and acted with resolve.

The city state also enters this new era with considerable strength, such as a strong economy, a cohesive society and sound public finances, PM Wong added.

“We will stand together when pressures mount, and we will continue pushing forward to seize new opportunities on the horizon,” he said.

“The world may be more uncertain, but we are prepared.”