After releasing October 10 a set of figures that were far worse than expected, the Ministry of Trade and Industry revised its annual forecast for a third time since January, saying that gross domestic product would contract 3 per cent this year.

The city-state is reeling from the combined impact of the cyclical downturn in the world's largest economies, the technology slump and the increasingly severe fall-out from the September 11 strikes in the United States.

Minister for Trade and Industry George Yeo Yong-Boon said: "The attacks and the resulting uncertainty have made the situation much worse, removing all hopes of an early recovery."

Since Singapore gained independence from Malaysia in 1965 its economy has registered only one year of negative growth, in 1985. That year the economy contracted 1.6 per cent. During the regional financial crisis of 1998 Singapore slipped into recession, but the full-year GDP figure remained positive.

"We started the year forecasting a growth rate of 5 per cent to 7 per cent," Mr Yeo said. "That was in a totally different world."

Singapore's economy entered recession in the first half of the year, after posting two successive quarter-on-quarter contractions.

The October 10's preliminary figures for the third quarter suggested that the downturn was becoming more severe and spreading across the width of the economy.

Year on year, GDP slid 5.6 per cent between July and September. Compared with the preceding quarter it slipped 9.9 per cent, after contracting 10.4 per cent in each of the two quarters before that.

Manufacturing, which accounts for about a quarter of Singapore's GDP, fell by 15.2 per cent year on year, while output from service-producing industries dropped by 0.4 per cent.

Yesterday's (Oct 10) data is a so-called flash estimate, based for the most part on observations in July and August, before the terrorist attacks. Mr Yeo said the revised figures were likely to be worse.

"Singapore's manufacturing output tumbled 21 per cent in August - the sharpest fall since the 1985 recession," he said. "Electronics output declined sharply by a record 37 per cent in August, compared with minus 33 per cent in July."

Economists said the unremittingly grim picture would raise expectations of a second set of off-budget measures to be presented in Parliament tomorrow.

Deputy Prime Minister Lee Hsien Loong will detail a package of policies to blunt the impact of the recession, expected to be worth between S$7 billion and S$10 billion.

It follows a smaller set of measures worth S$2.2 billion unveiled in July as the downturn began to bite.

"The substantial support measures will help companies cut costs and reduce the need to make deep cuts in their operations.

"This should allow more workers to keep their jobs even though overall unemployment is bound to increase," Mr Yeo said.

The jobless rate jumped to 4 per cent in September, up from 3 per cent in June and 2.6 per cent in March. The government expects it to hit 4.5 per cent by the end of the year and push higher still in the first half of next year.

The Monetary Authority of Singapore said it was widening the band in which it allowed the Singapore dollar to trade. Analysts said this would allow the currency to weaken.