Singapore upgraded its economic outlook for 2024 as third quarter gross domestic product growth beat expectations and initial estimates, helped by stronger semiconductor production and engineering demand.

GDP rose 5.4% year-on-year in the third quarter, government data showed, faster than the 4.1% official advance estimate released last month and a median forecast of 4.6% in a Reuters poll of economists.

The trade ministry also raised its GDP growth forecast for 2024 to 3.5% from a previous range of 2.0% to 3.0%. 

“We are not ruling out that the number could be higher than 3.5%,” Beh Swan Gin, permanent secretary at the trade ministry, said.

GDP for the July-September quarter was also higher than the annual growth of 3.0% in the second quarter.On a quarter-on-quarter, seasonally adjusted basis, GDP expanded 3.2% in the July to September period, higher than both the advance estimate of 2.1% and the second quarter growth of 0.5%.

Beh said the higher-than-expected Q3 GDP was due to demand for semiconductors that spilled over to the precision engineering industry with higher output of industrial machinery and semiconductor equipment.

“Global monetary easing and China’s fiscal stimulus will likely support growth going into 2025, despite the risk of an escalation in the U.S.-China trade war,” said Maybank economist Chua Hak Bin.

The MAS left monetary policy settings unchanged last month in its last review of the year as inflation pressures continued to moderate and growth prospects improved. The next policy meeting is in January.

Maybank’s Chua said next week’s inflation data will be a key indicator to watch.

“If core and services inflation remains sticky, the MAS may not ease in January,” he said.

The MAS has said core inflation should ease to around 2% by the end of this year. Annual inflation was 2.8% in September.