By Xinghui Kok

SINGAPORE, Jan 2 (Reuters) - Singapore's economy grew 5.7% in the fourth quarter from a year earlier, lifting full-year GDP growth to the strongest since 2021, underpinned by robust gains for the manufacturing sector and a global boom for AI-related products, preliminary government data showed on Friday.

Annual economic growth for 2025 came in at 4.8%, the trade ministry said, well ahead of its November forecast of "around 4.0%" and a previous range of 1.5% to 2.5%.

Economists polled by Reuters had expected annual growth of 3.7% in the fourth quarter.

"Growth during the quarter was largely driven by output expansions in the biomedical manufacturing and electronics clusters," the trade ministry said in a release, adding the expansion in the tech-sector was bolstered by "sustained demand for AI-related semiconductors, servers and server-related products."

OCBC economist Selena Ling described 2025 as a "stunning year" for the city-state which had 4.4% growth in 2024.

"This impressive outcome marked a significant upward revision from earlier forecasts that had projected slower growth and reflected a resilient global economy and export demand, some front-loading ahead of reciprocal tariff pressures and also broad-based gains across key sectors," said Ling.

On a quarter-on-quarter seasonally adjusted basis, GDP expanded 1.9% from the third quarter, according to advance estimates from the trade ministry.

In his New Year message on Wednesday, Prime Minister Lawrence Wong said while full-year growth was stronger than expected in 2025, it  would be challenging to sustain that pace of growth this year.

Wong pegged last year's growth to U.S. tariffs being imposed later and at lower levels than expected, and an AI-related surge in demand for semiconductors and electronics.

Friday's data release did not include any forecasts for 2026. The ministry has previously forecast this year's GDP growth at 1.0% to 3.0%.

OCBC's Ling expects 2% year-on-year GDP growth for 2026.

At a review in October, the Monetary Authority of Singapore left monetary policy unchanged as growth in the city-state remained resilient despite challenges from U.S. tariffs. The next policy review is due later this month. 

Singapore's exports to the United States are subject to a 10% tariff. That is lower than the tariffs imposed on its Southeast Asian neighbours, but sectoral levies - including a 100% tariff on branded drugs - remain a concern.

Broader sectoral tariffs could hurt demand for Singapore's exports, including semiconductors, consumer electronics and pharmaceutical goods. The central bank has said those three sectors account for about 40% of exports to the United States.

(Reporting by Xinghui Kok; Editing by John Mair and Shri Navaratnam)