The 2006 growth figure from Lee Hsien Loong, in a New Year's Eve address released to the media, was around the middle of the government's November forecast of a 7.5 to 8 percent expansion.

"The economic outlook is positive," Lee said. "In Asia, China and India will remain powerful growth engines."

But Lee reiterated an earlier government forecast for growth of between 4 and 6 percent in 2007 as Singapore faces downside risks such as a slowing US economy, weaker global electronics demand, and high oil prices.

Singapore, which is trying to diversify its economy in the face of competition from low-cost countries such as China and Vietnam, drew a record number of more than 9.5 million tourists in 2006 and created its largest number of new jobs ever.

The country is making a big push into the biomedical sector and wants to boost services -- promoting everything from private banking to tourism to education -- to provide new sources of growth. It attracted S$8.8 billion in fixed asset investments in 2006 -- the highest level in recent years -- Lee said.

Two huge casinos set to open by 2010 are expected to double tourist arrivals to 17 million a year as the country lures travellers from across the region, with tourism receipts tripling to S$30 billion by 2015.

"The economy has diversified and has become a lot less vulnerable and more resilient," said Chua Hak Bin, an economist at Citigroup.

Singapore's trade-dependent economy has benefited from three years of strong global growth, with a robust US economy fuelling demand for the city-state's manufactured goods and high oil prices sparking a surge in output in its shipyards.

Singapore has, by some measures, the world's busiest port and is home to Keppel Corp. and SembCorp Marine Ltd, the world's biggest oil rig manufacturers.

HIGHER PAY, FOR SOME

This economic success has sent Singapore's benchmark Straits Times share index to all-time highs in 2006 and driven the Singapore dollar to its highest level against the US dollar in nearly a decade.

The property market is fast on the mend, with some high-end homes sold at prices not seen since before Asia's 1997/98 financial crisis. Wages in certain sectors have spiralled higher, although a widening income gap is causing some discontent.

"We will consolidate our social cohesion at a time when incomes are stretching out," Lee said, adding that while wages at the upper end of the spectrum have risen, those at the lower end have increased by much less or even stagnated.

Lee said the government would consider lifting employers' contributions to the country's main pension scheme, known as Central Provident Fund (CPF).

But he said the increase would probably be between 1-2 percentage points to lessen the impact on Singapore's competitiveness, and could be partly offset by lower direct taxes, particularly for companies.

"The economic expansion hasn't benefited workers as much as it has benefited the companies. You have seen corporate profitability rise, but the wage increase has been small," said Citigroup's Chua.

Higher contributions to the CPF could go some way towards redressing that, Chua said, at a time when the government plans to raise the goods and services tax to 7 percent from 5 percent.

Singapore's strong growth in 2006 followed a 6.4 percent expansion in 2005 and a 8.8 percent surge in 2004 when the economy rebounded from a regional outbreak of SARS (Severe Acute Respiratory Syndrome).A recent Reuters poll of economists forecast growth of 7.9 percent in 2006.

The government and analysts alike have forecast lower growth in 2007 as a slowing US housing market weighs on consumer demand in the world's biggest economy. But growth in Europe and in regional economies such as China may help offset any major impact from slower US growth.

The government is due to release advance gross domestic product data for the fourth quarter on Wednesday at 8 am. This early estimate is based largely on figures from October and November.

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