GDP outlook lifted as industrial production beats expectations

UOB and Nomura see GDP revised up to about 5.2%.

Singapore’s economic outlook has been revised higher by analysts as industrial production (IP) in March outperformed expectations, driven by a strong rebound in electronics and semiconductor output.

Industrial production rose 10.1% year-on-year in March, sharply accelerating from 3.3% in February and well above consensus expectations of around 6%. On a seasonally adjusted basis, output increased 4.7% month-on-month, reversing the previous month’s contraction and pointing to renewed momentum across key manufacturing clusters.

According to UOB, the stronger-than-expected outturn lifted first-quarter 2026 manufacturing growth to 7.9% year-on-year, above the 5% implied in the government’s advance GDP estimate.

This performance implies a likely upward revision to Singapore’s first-quarter GDP growth to around 5.2% year-on-year, compared with the earlier estimate of 4.6%, assuming services and construction remain broadly unchanged, the report said.

It highlighted that the magnitude of the IP surprise is sufficient to warrant a meaningful upward revision to overall GDP growth.

The strength was led primarily by the electronics sector, which continued to benefit from robust artificial intelligence-related demand.

Electronics output expanded about 30% year-on-year, supported by a 30.6% increase in semiconductor production and strong growth in infocommunications and consumer electronics. Precision engineering also strengthened, rising 14% year-on-year, driven by higher output of semiconductor equipment, optical instruments, and electronic components.

On a monthly basis, electronics output rose 5.7%, extending the gains seen in February and reinforcing its role as the key driver of Singapore’s manufacturing cycle.

CGS International said that the electronics strength reflects both cyclical recovery and structural expansion of Singapore’s semiconductor ecosystem.

It noted that Singapore accounts for roughly 10% of global semiconductor output. “We believe this is significant given the industry-wide shift towards advanced chips, where AI-driven applications are accelerating demand for cutting-edge fabrication capacity globally.”

The report also pointed to government efforts, including an $800m Semiconductor Research, Innovation and Enterprise initiative, to deepen R&D capabilities and reinforce Singapore’s position in the global chip value chain.

“However, heightened geopolitical uncertainty could disrupt logistics and raise input costs,” CGS said. “Concerns around shortages in helium, a critical input in semiconductor manufacturing, remain manageable for now.”

It said the impact is likely to remain contained, supported by existing inventory buffers, diversified supply across producers, and the use of recycling systems within fabrication facilities.

Meanwhile, performance across other clusters was mixed. Biomedical manufacturing, particularly pharmaceuticals, rose 14.4% month-on-month but declined 17.9% year-on-year due to high base effects. 

The chemicals cluster was the main drag, contracting 18.5% month-on-month and around 16% year-on-year, driven by declines in petroleum and petrochemicals output.

This weakness was attributed by official industry commentary from the Economic Development Board (EDB) to feedstock supply disruptions, whilst industry reports cited refinery cutbacks and logistical constraints linked to ongoing geopolitical tensions affecting shipping routes, as cited by UOB.

Nomura also noted the breadth of the March upside surprise, stating that industrial production exceeded expectations and implied a clear upward revision to first-quarter GDP growth.

It estimated that GDP growth would be revised to around 5.2% year-on-year from 4.6%, and highlighted that Singapore likely avoided a sequential contraction in output.

“We continue to expect the global tech uptrend and broadening AI-related demand to provide a boost to electronics output growth,” Nomura said.

UOB said that headwinds in the petrochemicals segment could intensify in the coming months as refineries deplete their limited feedstock inventories. “Nevertheless, overall IP could continue to hold up, cushioned by strong electronics and semiconductor output amid AI‐related tailwinds.”