Total factory output for December grew by just 0.3 percent in December from a year earlier, according to the Economic Development Board, marginally below market expectations and leaving 2003 manufacturing growth at just 2.8 percent.

The volatile pharmaceutical sector was the main drag on December's figures, falling 63.2 percent from the same period a year ago. Output for the entire biomedical manufacturing cluster fell 54.2 percent.

Electronics, however, which is Singapore's most important manufacturing sector, recorded 17.2 percent year-on-year growth in December and 5.5 percent for all of 2003.

Increased output of mobile phones helped drive growth in the electronics cluster, with the info-comms and consumer product segment growing 41.5 percent.

"Riding on the wave of vigorous demand, the production of semiconductors was (also) ramped up by 24.5 percent, especially for chips used in mobile phones and consumer electronics products," the EDB said.

Most other manufacturing clusters performed relatively well, with chemicals up 6.1 percent, precision engineering 9.3 percent higher and transport engineering up 5.9 percent.

The biomedical sector dragged down the overall figures, which followed much brighter manufacturing expansion numbers of 8.1 percent in November and 19.3 percent in October.

"The numbers are disappointing but the weaknesses are all due to volatility in the biomedical sector," Paul Schmyck, an analyst with market intelligence firm IDEAglobal, told AFP.

"I don't think the data is any cause for panic. What the markets look at more is what is happening in the electronics industry."

United Overseas Bank economist Low Ping Yee echoed Schmyck's assessment, pointing out that pharmaceutical output was headed for a big fall in December after surging by about 100 percent during the same month in 2002.

"Overall, even though the growth was lower than market expectations, we don't think there's anything to worry about," Low said.

"The outlook is still pretty positive."

The government has said Singapore's economy is expected to grow 3.0 to 5.0 percent this year, a forecast most private sector economists have said is cautious and likely to be exceeded.

Both Low and Schmyck said the poor manufacturing performance in December does alter the overall outlook for 2004, with the recovering US economy and the strength in the domestic electronics sector the biggest drivers of growth.

"Singapore should be up for clear 5.0 percent growth this year," Schmyck said.

However, he warned that the current Asian bird flu crisis and a potential second major Severe Acute Respiratory Syndrome outbreak were wildcards that could lower economic growth for the year.

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