But not everyone is benefiting from the growth, and a widening income gap is posing a challenge to the nation's cohesion, Prime Minister Lee Hsien Loong said Wednesday, Aug 8, as the country marked its 42nd year of independence.

The Ministry of Trade and Industry raised its full-year economic growth forecast to between 7 percent and 8 percent from between 5 percent and 7 percent, Lee said, amid a positive outlook helped by low unemployment and healthy wage increases.

Singapore's trade-dependent economy grew 7.9 percent last year.

"Workers are enjoying good wage increases and higher bonuses because businesses are doing well," he said. "We are organizing ourselves more efficiently, and making better use of our resources."

Lee said the country of about 4.5 million added 111,000 jobs in the first half of the year - an all-time high - and that unemployment stood at 2.4 percent.

Singapore also stands to benefit from favorable conditions in the region, Lee said, adding that while global financial markets have been choppy in recent days, the medium-term fundamentals for Asia remained strong.

"Asia has progressed, and become more developed and dynamic," he said. "Singapore is at the heart of this rising Asia."

However, Lee said, one of the country's major challenges was to tackle an income disparity that has been widening in recent years as more low-skilled jobs are made redundant by technological advancements or moved to countries with cheaper labor.

"Income gaps are widening - here, and all over the world," he said. "I know many older Singaporeans worry about whether they can make ends meet."

Lee said the government's approach in addressing the problem has been to strengthen social safety nets by improving education and training. To cope with the aging population, Lee pledged to keep medical care affordable for the elderly and make the country's infrastructure more elderly friendly.

Between 2000 and 2005, incomes in Singapore's wealthiest households increased at a 2.8 percent annual rate, while they declined by 4.3 percent in the second-lowest one-tenth of society, according to the government's most recent survey.

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