The manufacturing sector continues to drive Singapore's economy and will remain an important engine of growth next year, even as its momentum eases.
Manufacturing output rose 14.6 per cent last month from a year ago, after a revised 17 per cent growth in October, according to data released by the Economic Development Board (EDB) yesterday.
Excluding the volatile biomedical manufacturing cluster, output grew 12.4 per cent last month.
UOB economist Barnabas Gan said the latest data indicates that semiconductors and its related industries have been strong drivers of growth for Singapore.
Manufacturing output grew 13 per cent from January to last month, over the same period last year. The industry posted broad-based growth last month across its clusters.
The outlook for the sector remains favourable for next year, he noted. The bank upgraded its full-year manufacturing growth forecast for this year to 12.5 per cent, up from 11.5 per cent.
It expects factory output to grow by 4 per cent next year.
"This suggests that despite the high-base growth rate seen in 2021, global trade activity is expected to stay buoyant as we approach the new year," said Mr Gan.
He added that it is too early to evaluate the potential impact of the Omicron variant but it continues to be the key risk to global trade demand, thus also likely impacting Singapore's export and manufacturing outlook then.
Mr Irvin Seah, senior economist at DBS Bank, added: "Manufacturing remains the main engine of growth. But with global demand for semiconductors losing momentum, the sector could see weaker performance in the coming quarters."
Mr Gan said that the ongoing global economic recovery, strong global trade and higher vaccination rates in Singapore's key trading partners will, however, drive the Republic and potentially South-east Asia's growth prospects next year.
Barclays economist Brian Tan said economic growth is on track to moderate to 5.5 per cent year on year in the fourth quarter of this year, given the latest data. The decrease from the 7.1 per cent growth in the third quarter is largely due to unfavourable base effects, he noted.
Singapore's key electronics sector expanded by 10.2 per cent year on year last month, picking up pace from the 6.7 per cent growth in October. All segments saw a higher level of output amid strong export demand.
The transport engineering cluster's output grew 31.2 per cent. Meanwhile, the volatile biomedical cluster saw output rise 20.1 per cent, slowing from a 56.8 per cent expansion the previous month.
The pharmaceuticals segment expanded 31.2 per cent with higher production of active pharmaceutical ingredients.
Precision engineering output expanded by 13.7 per cent last month. General manufacturing production grew 8.8 per cent, with all segments recording higher output, while chemicals output increased by 8.5 per cent.
Analysts said the easing of border controls will help to boost Singapore's economy and create more jobs next year when manufacturing, the main pillar of growth in the past two years, is likely to lose some steam.
Temporary setbacks such as the recent freezing of new ticket sales for vaccinated travel lane (VTL) flights and buses are likely to slow Singapore's reopening plans.
However, economists estimate that as many as 125,000 foreign workers are likely to pass through the VTLs, reinvigorating sectors such as construction and marine engineering, in the later part of next year.
Dr Chua Hak Bin, regional co-head of macro research at Maybank Kim Eng in Singapore, said: "A broader services and construction recovery will drive economic growth in 2022, as the manufacturing momentum eases."
SEE BUSINESS •B7
