SINGAPORE - Singapore's economy will be buffeted by global tensions, its prime minister said on Tuesday, as he delivered a budget offering support for workers and businesses as well as help with living costs ahead of an election this year.

Lawrence Wong, who is also finance minister, said the United States and China were locked in a "fierce contest for global supremacy" and were prepared to take more assertive actions to advance their interests.

"We can expect escalating attempts at containment and counter containment with ripple effects that will inevitably draw in other countries, including Singapore," Wong said.

"All these pressures will reshape the global economy and dampen prospects for global growth. As a small and open economy, we will feel the impact."

Singapore's GDP accelerated to 4.4% in 2024 from a revised 1.8% in 2023, but the trade ministry expects growth in 2025 to moderate to 1.0% to 3.0%, a forecast Wong reiterated on Tuesday.

The budget is Wong's first as premier after taking the top post last year. It comes ahead of a general election that must be held by November and will be widely seen as a barometer of his popularity.

His People's Action Party is almost certain to dominate and win most seats, as it has in every vote since independence in 1965, although its share of the popular vote will be closely watched after one of its worst ever electoral performances in the last contest in 2020.

Although inflation tapered to a three-year low in December, the population of about 6 million people is still dealing with higher costs, with consumption tax going up by two percentage points in 2023 and 2024.

As well as a host of measures to manage living costs, Wong pledged programmes to boost skills of workers, corporate tax rebates for businesses and support for increasing wages of low-income employees.

He pledged tax incentives for fund managers who invested substantially in Singapore equities and said the budget would focus on tech and innovation, including development of a semiconductor research and development facility worth S$1 billion ($745 million).

Singapore accounts for about 11% of the global semiconductor market, with 20% of global semiconductor equipment manufactured in the country.

"This budget will help to mitigate the impact of rising costs, but in the longer term, the best way to adjust to higher prices is to grow the economy and increase productivity," Wong said.

(Reporting by Xinghui Kok, Rae Wee and Fanny Potkin; additional reporting by Bing Hong Lok; Writing by John Mair and Martin Petty; Editing by Jacqueline Wong)