Singapore's efforts to overcome its worst downturn since statehood in 1965 also hinges on a rebound in global demand for electronics goods, a pillar of the trade-dependent economy, Goh said in his annual New Year message to the nation.

"The outlook for next year depends on developments outside Singapore, especially the US economy, the global electronics industry and the war against terrorism," he said.

"It is better for us to prepare for another lean year," said Goh.

For 2002, he said the government is sticking to its forecast of economic growth in a range between a 2.0 percent contraction and a 2.0 percent expansion.

The economy grew 9.9 percent last year and the government had most recently forecast a 3.0 percent contraction this year.

In the fourth quarter to December, gross domestic product (GDP) slumped 7.0 percent compared with a year earlier, following a 5.6 percent decline in the third quarter.

Compared with the previous three months, however, December quarter GDP grew 4.3 percent, Goh said.

On the employment front, Goh maintained earlier government forecasts that the unemployment rate would rise to 4.5 percent, up from 3.1 percent last year, and job losses for the whole year would total around 25,000.

This year's projected unemployment rate exceeded the 4.4 percent recorded in 1998 at the height of the Asian financial crisis.

Singapore was cushioned to some extent during the 1997-98 crisis because of continuing strong technology exports to the US.

The Ministry of Trade and Industry on Wednesday will release more provisional data on the island's state's fourth quarter GDP and full year economic performance.

Despite the poor state of the economy, Goh said he is confident the island-state can return to expansion in the next decade with an annual average of 4.0 percent to 6.0 percent growth.

But this can only be achieved with the implementation of structural changes aimed at enhancing competitiveness, said Goh.

"As we cope with the recession, we have also to undertake structural changes because of the tectonic shifts in our external environment," he said.

"We must add an innovation engine to our investment and efficiency-driven economy, so that we can become more of an entrepreneurial knowledge economy."

Goh, who has vowed to restore the recession-battered economy to health before stepping down in two to three years, again reiterated his key mission now was to find new sources of growth for the island.

"Our critical priority in the next few years is to remake Singapore. We have to restructure our economy and find new ways to make a living," said Goh.

He led the ruling People's Action Party to a resounding victory at the November 3 polls amid a severe recession, raising its share of the popular vote to 75 percent, from 65 percent in the 1997 polls.

Goh had campaigned on the twin challenges of restructuring the economy and softening the blow of the country's recession, which was made worse by the fallout from the September terror attacks in the United States and slowdown in the world's major economies.

Adjustments for Singaporeans are inevitable given the economy was heavily dependent on foreign demand and due to the stiffer competition posed by China now that it was a member of the World Trade Organisation (WTO), said Goh.

"China's entry into the WTO will intensify the competition for investments and export markets," the premier said.

He said Singaporeans "need to change our mindset and operating environment" if the economy is to emerge stronger from the recession.

Deputy Prime Minister Lee Hsien Loong, widely expected to succeed Goh, is is at the helm of a committee formed by the premier after the elections to restore economic competitiveness and identify future growth areas.

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