Broker: Maybank Research Pte Ltd
Date of Report: June 26, 2025

Singapore’s Manufacturing Defies Trade Shocks: 2Q GDP to Climb 3.4%, No Technical Recession in Sight

Robust Manufacturing Shields Singapore from US Tariff Turbulence

Singapore’s manufacturing sector has demonstrated remarkable resilience in the face of recent US reciprocal tariffs. Contrary to earlier fears, trade and production have remained robust, with industrial production (IP) expanding by a healthy 3.9% year-on-year in May. Sequentially, seasonally-adjusted IP dipped slightly by 0.4%, following a strong 4.9% surge in April. The consistent strength across April and May readings signals that Singapore has likely steered clear of a technical recession in the second quarter.

Sectoral Stars: Precision Engineering, Transport Engineering, Electronics, and Biomedical

Electronics: The electronics cluster grew 3.9% in May, after a stellar 14.6% in April. Growth, though slowing from prior double-digit increases, remains positive. Notably, infocomms & consumer electronics soared 42.6% in May (down from 67.4% in April), while semiconductors held steady at 3.4%. However, segments such as computer peripherals & data storage (-18.7%) and other electronic modules & components (-20.8%) posted contractions.
Precision Engineering: This sector accelerated to 10.3% growth in May (up from 1.6% in April), driven by surging demand for semiconductor equipment and measuring devices. The machinery & systems segment saw a robust 12.3% expansion. New chip plants, such as UMC’s fabrication facility opening in April, are set to bolster output further when mass production commences in 2026.
Transport Engineering: Output soared 25.6% in May, supported by aerospace’s impressive 43.6% expansion. The rise in air travel has fuelled demand for airline maintenance and aircraft parts.
Biomedical Manufacturing: Output climbed 6.1% year-on-year, primarily due to a 17.9% surge in the volatile pharmaceuticals segment. Nonetheless, year-to-date growth in this cluster is a modest 0.5%.

Chemicals and General Manufacturing: Muted Performance

Chemicals: After four months of contraction, the chemicals sector edged up by 0.2% year-on-year in May. Petroleum (+2%), petrochemicals (+1.1%), and other chemical products (mainly fragrances) led this recovery, while specialties fell 7.1% due to declines in industrial gases, biofuels, and food additives.
General Manufacturing: This segment shrank 8.9%, its fifth consecutive monthly contraction. The decline was led by weaker production of beverage concentrates, bakery products, structural metal components, and paper & paperboard containers.

Singapore’s 2Q GDP Set for 3.4% Growth, Full-Year Outlook Upbeat

Manufacturing output expanded by 4.7% in April-May, compared to 4.4% in the first quarter. Non-oil domestic exports (NODX) also climbed by 4.4% in the same period, while non-oil re-exports surged 27.7%. These strong performances helped Singapore withstand the US tariff shock, supporting manufacturing, export, and wholesale trade services in the second quarter.
2Q GDP Projection: 3.4% year-on-year growth (down slightly from 3.9% in 1Q), with a quarter-on-quarter seasonally adjusted increase of 0.5%.
Full-Year 2025 Forecast: Growth is expected at 2.4%, exceeding the Ministry of Trade and Industry’s (MTI) forecast range of 0-2%. Easing monetary conditions, construction momentum, and a potential fiscal SG60 package in 3Q25 are seen as buffers against any second-half trade slowdown.
Monetary Policy Outlook: The Monetary Authority of Singapore (MAS) is expected to maintain a modest appreciation bias for the S$NEER policy band in July and October after two earlier reductions this year. The 3-month SORA rate, now at 2.2%, is forecast to fall to 1.7% by end-2025, supported by safe-haven flows and anticipated Fed rate cuts.

Sectoral Table: Industrial Production Breakdown (% YoY)

Key Drivers and Outlook for Remainder of 2025

Frontloading Activity: Manufacturing and trade-related industries have benefited from frontloading as firms leverage a 90-day tariff pause and exemptions on electronic products. However, a potential slowdown or “payback” is anticipated in the second half, depending on the final shape of US tariffs.
Sectoral Divergence: While manufacturing, trade-related services, and construction remain resilient, consumer-oriented sectors (accommodation, retail, F&B) continue to lag due to cautious household demand and stabilizing tourist arrivals. Finance sector growth may also moderate due to easing loan growth in an uncertain global environment.
Upward Revisions Possible: The Ministry of Trade and Industry may upgrade 1Q GDP growth to 4% (from 3.9%), reflecting stronger-than-expected manufacturing performance.

Leading Research Team and Contact Information

Maybank’s Economics Research team, led by Chua Hak Bin and Brian Lee Shun Rong, provides active coverage and analysis across ASEAN, with sector specialists for Malaysia, Singapore, Indonesia, Thailand, the Philippines, and Vietnam. Their multi-disciplinary approach ensures deep insight into regional economic trends and implications for investors.

Conclusion: Singapore’s Resilience and Investor Implications

Singapore’s manufacturing sector has weathered recent trade shocks with resilience, fueling GDP growth and providing a buffer against global uncertainties. With continued strength in precision engineering, electronics, and transport engineering, and a supportive policy environment, the city-state’s economic outlook remains positive for 2025. Investors should monitor upcoming policy moves, sectoral shifts, and the impact of potential US tariff adjustments as Singapore navigates the evolving global landscape.