While the city-state upgraded its 2007 growth forecast slightly - to between between 4.5 percent and 6.5 percent, up from 4-6 percent - that's still slower than than the 7.9 percent growth notched last year due to projected slowdown in global demand for electronics, Singapore's main export.

Global economic conditions have improved over the past few months, with oil prices falling from their 2006 peak and fears of a housing market correction in the US subsiding, the Ministry of Trade & Industry said in a statement.

OCBC strategist Selena Ling said Singapore's upgraded 2007 forecast is "achievable." She said the government's budget, which will be released Thursday, is likely to include some "fiscal stimulus" that will offset lower global demand by supporting the domestic economy.

The government has flagged subsidies for low income households to offset an increase in the goods and services tax and may also announce new infrastructure spending. It has also indicated the 20 percent corporate tax rate will be cut by at least one percentage point.

Compared to a year earlier, Singapore's S$210 billion (US$136 billion; €105 billion) economy grew 6.6 percent in the fourth quarter, compared to the 7.0 percent year-on-year growth in the third quarter.

The manufacturing sector grew 7.7 percent from a year earlier in the fourth quarter, down from 9.5 percent in the previous quarter, due to a fall in output of electronics and chemicals.

Within the manufacturing sector, construction output rose 4.7 percent from a year earlier, marking a recovery for the building industry after several years of contraction.

The services sector grew 6.6 percent from a year earlier in the quarter after 6.3 percent growth in the third quarter.

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