SINGAPORE'S economy will likely grow 5.6 percent in 2008, slowing from last year's pace as external demand weakens on a flagging US economy, a survey of economists showed Monday, Mar 10.

The result of the quarterly survey by the Monetary Authority of Singapore, the city-state's central bank, fell within the range of the government's forecast of 4-6 percent growth this year.

Singapore's economy expanded 7.7 percent last year, led by growth in financial services and construction.

The economists' prediction is also a downgrade from the previous forecast of 6.3 percent growth in the bank's December survey, the bank said in a statement. The suvery polls 19 economists who closely watch Singapore's economy.

Analysts have recently lowered growth targets for economies across Asia that may suffer from weak demand for manufactured goods as the US nears recession.

The Singapore government has said a severe recession in the US - the city-state's largest trading partner - would likely have a spillover impact on "sentiment-sensitive" sectors such as electronics and financial services.

Singapore's manufacturing sector, which contributes about one third of annual gross domestic product, is expected to expand 5 percent in 2008, against the previous forecast of 6.8 percent, the survey showed. In 2007, manufacturing increased 5.8 percent.

The construction industry is expected to be more resilient, underpinned by work on two casinos and several large-scale commercial developments. The economists predict that construction will grow 15.9 percent, higher than the previous forecast of 13.5 percent. Last year, the sector expanded 20.3 percent.

Growth in the financial services sector is predicted to rise 9.5 percent, slightly faster than the December survey's forecast of 9 percent. Singapore aspires to be a regional hub for wealth management and has drawn several top institutions to establish a regional center on the island.

The survey also forecasts for Singapore's inflation to increase sharply in 2008, which would likely pressure the central bank to appreciate the currency. The central bank uses uses foreign exchange rather than interest rates to control prices because external trade dwarfs the domestic economy.

The consumer price index is expected to rise 5 percent in 2008, higher than the 3.7 percent projected in December and the 2.1 percent rise posted in 2007.

The city-state's inflation rose 6.6 percent in January, a 25-year high, with housing and food costs rising much faster than predicted.

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