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ECONOMISTS believe that Singapore’s 2024 gross domestic product growth may surpass the Ministry of Trade and Industry’s forecast range of 2 to 3 per cent, after factory output jumped 21 per cent year on year in August.

This was a big increase from July’s revised 2 per cent expansion, Economic Development Board (EDB) data showed on Thursday (Sep 26). Economists also noted that it is the fastest growth since June 2021.

The latest print far outstripped private-sector economists’ median forecast of 8.6 per cent growth in a Bloomberg poll.

Excluding the volatile biomedical sector, industrial production gained 27.5 per cent on year last month, up from the 3.6 per cent expansion in July.

On Thursday, EDB noted low bases in August 2023 for some segments of the electronics and chemicals clusters. Added ANZ’s head of Asia research, Khoon Goh: “Base effects contributed to part, but not all of the surge.”

Electronics output was the key driver, with Maybank analysts Chua Hak Bin and Brian Lee highlighting that it grew by the most since July 2017.

The duo expects flash third-quarter GDP growth to accelerate to 4.3 per cent, on the back of the manufacturing resurgence. They also upgraded their full-year GDP forecast to 3.5 per cent, from 3 per cent previously.

ANZ’s Goh also noted that July and August’s strong industrial production numbers are “setting up for a huge positive contribution from the manufacturing sector to Q3 GDP”, though he has not yet firmed up his forecast.

“But at this point, manufacturing GDP could contribute over one percentage point to quarter-on-quarter growth,” he added. “If Q3 GDP does come in a strong as what the data is suggesting, then 2024 full-year growth could not only come in near the top of the official 2 to 3 per cent forecast, but even exceed it.”

For Q3, Barclays senior regional economist Brian Tan believes that GDP growth is on track to rise to 4.2 per cent on year, from 2.9 per cent in Q2.

Depending on the extent of the pullback in Q4, full-year growth could hit or even exceed the official range, he said, noting that the manufacturing activity rebound implies upside risks to Barclays’ 2.5 per cent estimate for 2024.

Similarly, while RHB’s acting group chief economist Barnabas Gan and associate research analyst Laalitha Raveenthar maintained their full-year economic growth forecast at 2.5 per cent, they also noted upside risks to the projection.

RHB upgraded its industrial performance forecast to 1.5 per cent for the full year, from 1 per cent, on August’s strong performance, the relatively positive outlook on electronics and other specific sectors, and the improved domestic economic landscape.

Most clusters expand

Factory output in the key electronics sector surged 49.1 per cent from the year-ago period in August, higher than the preceding month’s 2.9 per cent year-on-year climb.

The improved performance was “supported by improved electronics demand as well as a low semiconductor production base in August last year”, EDB said.

All segments charted growth, led by semiconductors, which was up 54.6 per cent.

“Singapore is finally joining in the global semiconductor upswing after sitting out in the first half of the year,” said Goh.

The infocomms and consumer electronics segment was up 28.6 per cent; other electronic modules and components, 21.5 per cent; and computer peripherals and data storage, 18.4 per cent.

Maybank’s Lee said: “The data reinforces our previous view that manufacturing activity will strengthen discernibly in the second half, as electronics demand broadens beyond advanced-node AI chips.”

In addition to electronics, all clusters except biomedical manufacturing reported growth:

• Chemicals (11.1 per cent)

• Precision engineering (7.9 per cent)

• Transport engineering (3.9 per cent)

• General manufacturing (2.5 per cent)

Although transport engineering and general manufacturing output expanded in August, these were slower year-on-year increases than recorded in July.

On the other hand, biomedical manufacturing was again the worst-performing cluster for the month – but output fell 16.1 per cent year on year, narrowing slightly from July’s 17.4 per cent decline.

The cluster is “showing some signs of life”, said Goh, adding that positive year-on-year growth will likely come only at the end of the year.

The pharmaceuticals (-15.7 per cent) segment narrowed the year-on-year fall compared with July, but the medical technology (-18.7 per cent) segment’s contraction widened significantly.

On a seasonally adjusted monthly basis, manufacturing output grew 6.7 per cent in August, down from July’s 10.2 per cent increase. Excluding biomedical manufacturing, production climbed 11 per cent on the month, seasonally adjusted, up from 4.3 per cent in the preceding month.