Ministers told parliament the government was working on a second off-budget package to cushion the blow and would unveil the measures in mid-October.

"What is clear is that an economic recovery in the short term is unlikely. At this point, we expect our overall economic growth this year to become negative," Trade and Industry Minister George Yeo said.

"We expect the (third quarter) flash forecast to be out on October 7 and when that forecast is out we will also revise our GDP estimate for this year."

The Ministry of Trade and Industry later clarified that the flash forecast for the third quarter, based on two months of data, would be released as expected on October 10. Export-driven Singapore, suffering from a downturn in the global electronics sector and a US economic slowdown even before the attacks, now has an already reduced 2001 gross domestic product (GDP) growth forecast of 0.5 to 1.5 percent.

The city state slipped into recession after the economy contracted 0.9 percent in the second quarter.

"Consumer confidence and spending are expected to decline, increasing the risk of a U.S. and a global recession significantly," Yeo said. "The Singapore economy will be adversely affected."

MODEST PUMP-PRIMING

Finance Minister Richard Hu said the new measures would be more substantial than the S$2.2 billion (US$1.26 billion) package announced in July.

The first series featured the acceleration of infrastructure projects and the extension of property tax and rental rebates.

Some analysts expect the second tranche to stall the prospect of further job losses through a two percentage point cut in employers' contributions to the country's pension scheme.

The government halved employers' contributions to the fund in the wake of the Asian financial crisis. Contributions have since gone back up to 16 percent but a renewed cut was a possibility.

Others expect a package that would immediately reduce costs, such as individual and corporate tax cuts.

Yeo said the new measures would have a "modest amount of pump-priming".

"Over the last few months, the government has been working on a second package of additional measures to help ease the burden on companies and Singaporeans," he said.

"The World Trade Center attack has increased the urgency and the scale of measures required."

Yeo said the government expects unemployment this year and next to be worse than expected. The government previously said it expected job losses to top 20,000 in 2001.

STOCKS TAKE A HIT

The economic gloom, combined with uncertainties over US military action after the attacks in New York and Washington, has taken a toll on Singapore shares.

After jumping more than two percent at one stage, the benchmark Straits Times Index ended down 0.25 percent at 1,281.52 points on Tuesday.

The STI, which rose 3.5 percent on Monday, has lost 18 percent since the attacks and more than 33 percent this year.

"The market could be volatile from now on but the uncertainty about the future will keep a cap on any gains," said a trader at a European brokerage.