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Singapore raised its economic growth forecast for this year and sees global growth underpinning that momentum into 2018, with some moderation.

Highlights of GDP Report

Gross domestic product rose 5.2 percent from a year earlier, the fastest pace in more than three years, versus a median estimate of 5 percent

Compared to the previous quarter, GDP rose a seasonally adjusted and annualized 8.8 percent, higher than an earlier estimate of 6.3 percent

Growth forecast range for 2017 raised to 3-3.5 percent from 2-3 percent; economy seen expanding 1.5-3.5 percent next year

A healing in global trade this year has helped boost export-reliant economies like Singapore’s, with manufacturing buoyed by demand for electronics goods. Growth has started to broaden out to other industries, such as services, giving economists and the government reason to upgrade their full-year projections. Prime Minister Lee Hsien Loong said earlier this week that growth could exceed 3 percent in 2017.

The trade ministry said Thursday global growth is expected to improve next year, on the back of faster expansion in the U.S. and some emerging markets. The U.S. economy will probably “pick up slightly” due to a resilient labor market and modest business investment while growth in the eurozone area and in China is set to moderate, the officials said.

“The synchronized global recovery has legs,” said Chua Hak Bin, a Singapore-based senior economist with Maybank Kim Eng Research. A rebound in corporate spending in many economies, including in Southeast Asia, portends that “this investment revival will be the theme that will emerge in 2018.”

Export growth is set to taper off next year, with International Enterprise Singapore saying in a separate report on Thursday that expansion will probably be zero to 2 percent in 2018, compared with an estimated 6.5 percent to 7 percent for this year.

Recovery Broadening

Downside risks for next year include U.S. policy uncertainty, lingering protectionist sentiments, and tensions around North Korea, according to the ministry. At the same time, Singapore should continue to fare quite well, with domestic-focused industries and the labor market improving.

“We also see signs that the recovery is broadening,” with business services and retail looking better even though third-quarter growth was “primarily supported by manufacturing,” Loh Khum Yean, permanent secretary at the trade ministry, told reporters.

Manufacturing surged almost 35 percent in the third quarter from the previous three months, while the services industry, which makes up about two-thirds of the economy, grew an annualized 3.2 percent. Construction continued to suffer, contracting for a third quarter by 5.3 percent.

What Our Economists Say Tamara Henderson: On a GDP-expenditure basis, net exports were a slightly stronger drag on growth. But this was offset by much stronger household spending. Public spending was also much stronger, and the contraction in investment was not as large. If this is sustained in 4Q 2017 and 1Q 2018, the MAS is likely to dial back its monetary stimulus.

Growth has been surprisingly strong across Southeast Asia, with third-quarter data from the Philippines and Malaysia last week and Thailand this week exceeding forecasts, providing a more upbeat tone to the region as the U.S. Federal Reserve tightens monetary policy.

Singapore’s central bank left its policy stance unchanged last month, but gave itself room to tighten if necessary. Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore, told reporters on Thursday that the October stance remains appropriate and the regulator will continue to monitor developments.

— With assistance by Myungshin Cho, and Ailing Tan

( Updates with comment from economist in second paragraph after chart. )