SINGAPORE'S economic growth slowed in the fourth quarter of 2007 and the government warned that 2008 was unlikely to match last year's 7.5 per cent expansion.

Gross domestic product grew by 6 per cent in the October-December quarter from a year before, according to preliminary estimates released yesterday, Jan 2.

Singapore is the first Asian country to report quarterly economic data and the latest figures suggest the region could be vulnerable to an expected US slowdown.

The government predicts full-year growth of 4.5 to 6.5 per cent for 2008. A fifth of the city-state's exports go to the US.

Singapore's economy slowed sharply from the third quarter. Growth fell by 3.2 per cent on an annualised, seasonally adjusted basis, the first contraction in four and a half years.

Economists said the deceleration was mainly due to the volatile pharmaceutical industry. The frequent shutdown of factories to retool production lines for the manufacture of new drugs makes the biomedical sector a wild card in terms of Singapore's economic growth.

Drug output fell 25 per cent in October and November after posting 33 per cent growth in the third quarter. This caused total manufacturing to expand by only 0.5 per cent in the fourth quarter from a year ago.

Singapore's electronics industry also suffered from sluggish global demand and could be depressed further in the coming months if the US economy weakens.

But Singapore is unlikely to suffer a severe slowdown such as that in 2001 since it has become less dependent on electronics for manufacturing, while its economy has become more diversified, with two large casino resorts under construction. The service sector grew by 8.3 per cent in the fourth quarter, close to its 8.5 per cent rate in the third quarter.

Construction, linked to several large-scale infrastructure projects and a property boom, reported a 24 per cent increase in the fourth quarter, its fastest growth in 24 years.

"Despite the moderation in growth, inflation pressures will likely accelerate further," said Kit Wei Zheng, an economist at Citigroup in Singapore.

A tight labour market, a sales tax rise, price increases for food and fuel, and higher electricity and road tariffs have caused the inflation rate to climb to 4.2 per cent, a 25-year high, and economists predict it could reach 6 per cent early this year.

But a rise in property prices, one source of inflationary pressure, appears to be on the wane after the government recently introduced measures to cool the market.

The government's price index for private residential property rose 6.6 per cent in the final quarter of 2007, slowing from a 8.3 per cent rise in the previous quarter.

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