Lim Boon Heng, secretary-general of the National Trade Union Congress, said Singaporeans must be ready to make sacrifices.

"We must be prepared to take a good hard look at our lifestyles and be prepared to make adjustments if necessary," Lim said in his annual Labour Day address.

Lim's warning comes ahead of the island's annual budget to be delivered this week by Deputy Prime Minister Lee Hsien Loong, who is being groomed to succeed Prime Minister Goh Chok Tong.

The budget is expected to take up most the recommendations proposed by a government-appointed committee tasked with exploring ways to help the recession-hit economy become more competitive.

Singapore is looking at bold reforms that include a cut in corporate and personal taxes as well as a higher goods and services tax (GST).

The economy has been in its worst recession for more than 30 years. Gross domestic product shrank 2.0 percent last year after nearly 10 percent growth in 2000.

Lim said that the proposed changes would affect the way Singaporeans save, invest, pay for healthcare and housing and urged them to get ready for adjustments.

"We have to review our choices. Do we want to continue to invest heavily in property or should we save more for our retirement?" he asked, adding that Singaporeans were spending too much on housing.

He also warned that unemployment was likely to deterioriate further after hitting a 15-year high of 4.7 percent in December.

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