But Lee, forecasting slower growth in 2008, said economic expansion in Southeast Asia's most advanced economy has brought "problems of success" including a shortage of prime office space.

The figure for 2007 economic expansion was at the lower end of the government's upgraded full-year growth target of 7.5-8.0 percent, and was below the 7.9 percent recorded for 2006.

"Singapore has enjoyed another year of robust expansion, although the fourth quarter saw slower growth. The economy grew by 7.5 percent for the year," Lee said.

The world economy faced a number of challenges in 2007, including high oil prices that are currently nearly US$100 a barrel, and problems in the banking and financial systems of both the United States and Europe, he added.

"But so far Asia's growth continues to be strong, and this has benefited us."

Lee said he is "cautiously optimistic" on the outlook for 2008, and forecast growth of 4.5-6.5 percent for the city-state.

"The US may go into a recession because of the financial market problems. A US downturn would affect Asia too, but the impact on us would be offset somewhat by the strong momentum in the dynamic Asian economies," he said.

"Singapore is in a strong position. If a US slowdown affects Asia, I am confident that we will weather it well, and our people and companies will continue to find opportunities amidst the challenges."

Singapore's economy, valued at S$210 billion (US$146 billion) in 2006, is highly dependent on external trade, which means the city-state is vulnerable to any slip-ups in the world's major markets.

Lee said the financial services sector in Singapore grew vigorously as financial institutions shifted more regional activities to the island nation.

The construction sector is especially strong, but is facing resource constraints, Lee said.

"To ease the pressure, the government has deferred some of its less urgent projects," he said.

Another problem that has resulted from four years of growth is the shortage of prime office space but the government is releasing enough land to meet demand over the next few years, he said.

Singapore is also facing a tight labour market, Lee said, and needs more workers at all levels, especially those with professional skills.

"This is why we are upgrading and re-skilling our workers, and bringing in foreign workers to top up the numbers. We must seize the moment and ride this wave of growth, while the winds and tides are with us," he said.

More than 20 percent of Singapore's population of 4.68 million are foreigners who do not hold citizenship or permanent residency, official figures show.

Among the major construction projects underway in the city-state are two multi-billion-dollar casino developments, a new downtown subway line, a waterfront office development and petrochemical plants.

                                                      Home