Industrial production strength lifts 2026 outlook but sector risks persist

Electronics and precision lead gains, whilst chemicals and offshore weigh on outlook.

Singapore is maintaining its full-year industrial production growth forecast at 4% and GDP projection at 3% for 2026, even as stronger-than-expected manufacturing output prompts a potential upward revision to near-term growth estimates, a report by RHB said.

Q1 2026 GDP growth is expected to be revised higher to 5.3% year-on-year, up from the Ministry of Trade and Industry’s advance estimate of 4.6%, following an industrial production expansion of 7.9% in the first quarter, compared to the earlier estimate of 5.0%.

RHB noted that, assuming unchanged contributions from services and construction, the stronger manufacturing print justifies the revision, though full-year forecasts remain broadly intact with modest upside risks.

Within the manufacturing sector, performance continues to be uneven across clusters. Electronics and precision engineering remain key growth drivers, supported by ongoing demand linked to the global AI cycle.

Electronics output rose 4.3% on a seasonally adjusted three-month moving average basis, driven by infocomms and consumer electronics at 17.7% and semiconductors at 2.8%, reflecting sustained strength in AI-related components.

Precision engineering expanded 5.9%, underpinned by higher semiconductor equipment production and growth in modules and components.

In contrast, weakness persisted in chemicals and transport-related segments. Petroleum and petrochemicals output fell 9.0% and 9.8% respectively, whilst marine and offshore engineering contracted 13.1%, extending its previous decline and marking its steepest fall since July 2020.

These declines were attributed to softer energy market conditions and ongoing geopolitical tensions affecting the sector.

Biomedical manufacturing showed mixed momentum. Whilst the sector remained in year-on-year contraction in March, it rebounded 3.7% on a three-month moving average basis, reversing the prior month’s decline, supported by improved output in pharmaceuticals and medical technology. However, volatility in the segment continues to weigh on visibility.

RHB maintains a broadly constructive outlook for Singapore’s manufacturing sector, underpinned by AI-driven electronics demand and resilience in precision engineering. However, they caution that external risks remain elevated, including geopolitical tensions in the Middle East, potential disruptions to critical inputs such as helium for semiconductor manufacturing, and trade policy uncertainty stemming from ongoing US Section 301 investigations.