Manufacturing Boom Drives Singapore’s Strongest Growth Since 2021
Singapore manufacturing surge pushed economic growth to 4.8 per cent in 2025, the fastest pace since 2021, driven by strong demand for pharmaceuticals and AI-related semiconductors.
Advance estimates released on Jan 2 showed the economy expanded 5.7 per cent year on year in the fourth quarter, up from 4.3 per cent in the previous quarter. Prime Minister Lawrence Wong announced the full-year growth figure on Dec 31.
The result beat the Ministry of Trade and Industry’s November forecast of around 4 per cent and exceeded 2024’s 4.4 per cent growth, underscoring the strength of the manufacturing rebound.
Singapore manufacturing surge driven by AI and pharmaceuticals
The Singapore manufacturing surge drew strength from the biomedical and electronics clusters. Manufacturing output jumped 15 per cent year on year in the fourth quarter, accelerating from 4.9 per cent in the previous quarter.
MTI reported robust growth in pharmaceutical output within the biomedical cluster. The electronics cluster also benefited from sustained demand for AI-related semiconductors, servers, and server-related products. These segments drove overall manufacturing performance.
Analysts also pointed to delayed and lower-than-feared US tariffs as a supporting factor. Tariffs on pharmaceuticals and semiconductors took effect later than expected. These products rank among Singapore’s largest exports, though analysts expect tariff effects to emerge more clearly in 2026.
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Quarterly momentum shows mixed signals
Despite strong year-on-year growth, quarter-on-quarter momentum eased. On a seasonally adjusted basis, economic growth slowed to 1.9 per cent in the fourth quarter, down from 2.4 per cent in the third quarter.
Ms Sheana Yue of Oxford Economics said the figures capped a resilient year for Singapore’s economy. She credited strong external demand for the performance. However, she warned that conditions could soften in 2026.
Prime Minister Wong also cautioned that sustaining the pace of growth would prove difficult amid rising trade and geopolitical tensions.
2026 growth outlook turns more cautious
Most analysts expect Singapore’s growth to slow in 2026, though forecasts remain above official estimates. MTI has projected growth of between 1 per cent and 3 per cent for the year.
The World Trade Organization expects global goods trade growth to slow sharply to 0.5 per cent in 2026, down from 2.4 per cent in 2025. The International Monetary Fund forecasts global economic growth of 3.1 per cent in 2026, slightly below the 2025 pace.
Despite these headwinds, Ms Yue expects Singapore’s GDP to grow by about 3.8 per cent in 2026. She cited resilient intra-Asian trade, re-exports linked to China’s export push, and continued investment in machinery and equipment.
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Domestic investment and policy support
Government-led infrastructure investment is expected to remain elevated in 2026. Analysts say these projects will help offset weaker external demand. Public spending continues to support construction and related industries.
Ms Selena Ling, chief economist at OCBC Bank, said the 2026 Budget will continue to focus on job security, cost of living, housing, education, healthcare, and retirement adequacy. She added that spending may tilt towards digital transformation, green economy investments, and workforce upskilling.
Ms Ling expects GDP growth of about 2 per cent in 2026. She also highlighted the upcoming Economic Strategy Review as a key guide for Singapore’s longer-term direction.
Services and construction add support
Other sectors also contributed to growth. The construction sector expanded 4.2 per cent in the fourth quarter, moderating from 5.1 per cent in the previous quarter, supported by both public and private projects.
Export-driven services sectors also performed well. Wholesale and retail trade, transportation, and storage grew 3.9 per cent. Information and communications, finance and insurance, and professional services expanded 4.2 per cent.
Overall, the Singapore manufacturing surge anchored the economy’s strong performance in 2025. Growth is expected to moderate in 2026, but resilient regional trade, steady investment, and policy support should help Singapore navigate a tougher global environment.
