Analysts hold 2026 growth view after 16.6% surge

Output increased 5.3% MoM in January.

Singapore’s manufacturing sector is poised to stay resilient in 2026, underpinned by sustained artificial intelligence (AI)-driven electronics demand and lower effective US tariff exposure, although banks flagged that trade and geopolitical risks could still cloud the second half outlook.

In separate research notes, Maybank and RHB Bank kept their growth projections intact after January factory data exceeded expectations, with both institutions citing strong semiconductor demand and supportive global conditions as key tailwinds.

Industrial production in Singapore rose 16.6% year-on-year in January, the fastest pace in 17 months, whilst seasonally adjusted output climbed 5.3% month-on-month.

Electronics remained the main driver, with output surging 44% from a year earlier. Semiconductor production more than doubled to 52%, alongside sharp gains in other electronic modules and components.

Precision engineering output expanded 13.2%, supported by semiconductor equipment demand, whilst transport engineering grew 25.2% on stronger aerospace activity. In contrast, biomedical manufacturing contracted 33.1%, dragged down by declines in pharmaceuticals and medical technology. General manufacturing fell 2.6%, weighed by food, beverages and tobacco output.

Maybank maintained its 2026 GDP forecast at 3.6%, at the upper end of the Ministry of Trade and Industry’s 2% to 4% range. It expects manufacturing and exports to remain firm at least through the first half, supported by the ongoing AI investment cycle.

The bank also noted that chips remain exempt from US tariffs and said strong aerospace and marine order books should sustain transport engineering.

The manufacturing purchasing managers’ index rose to 50.5 in January, a 10-month high, with the electronics PMI at 51.1.

RHB retained its full-year industrial production growth forecast of 4% and GDP growth estimate of 3%, citing continued resilience in global and domestic demand. It said the electronics, precision engineering and transport engineering clusters are closely integrated into global supply chains and should benefit from the current technology upcycle.

Both banks pointed to recent US tariff adjustments as a potential upside. Following a Supreme Court ruling and changes under Section 122, RHB estimates that around 62.4% of Singapore’s exports to the US are now exempt from tariffs, resulting in an effective tariff rate of about 3.76%, down from roughly 5.2% previously. Maybank similarly said Singapore's effective rate remains low, and many trading partners are seeing reduced levies.

Despite the constructive near-term outlook, RHB cautioned that uncertainties surrounding US trade policy, geopolitical tensions and potential tariff escalation could weigh on manufacturing and trade later in the year. It also flagged possible moderation in the second half due to base effects after strong 2025 growth.

Separately, Maybank expects the Monetary Authority of Singapore to tighten monetary policy in April by slightly steepening the appreciation bias of the S$NEER to pre-empt inflation pressures amid firm economic activity.