The government's advance estimate of gross domestic product for the three months to September 30 showed a rise of 3.7 percent from a year earlier, almost half what analysts had expected, and a 10.3 percent decline on an annualised quarter-on-quarter basis.

"Horrendous. My estimate was for 7.3 percent growth," said Pamela Wong, an economist at MMS International. "It's highly likely that we will go into a recession again in the fourth quarter."

Economists cut their full-year growth forecasts on the news towards three percent as the fourth quarter is widely expected to show a further weakening amid a slowdown in the United States and difficulties in Singapore's key electronics sector.

Financial markets fell on the data but economists said the central bank was unlikely to change its monetary policy stance for the time being.

The benchmark Straits Times Index slid 1.26 percent to 1359.30 by 0445 GMT, taking its loss since the start of the year to about 16 percent. The Singapore dollar weakened to around S$1.792 to the US dollar from S$1.788.

ECONOMIC OUTLOOK DARKENS

Singapore, which runs a very open economy, only came out of its worst downturn since 1964 in the second quarter after a year of contraction. "For the average guy on the street, there's still a recession. The top line numbers are good but they have not been translated to good employment growth," said Charlie Lay, an economist at 4Cast Ltd.

The government has forecast the economy will grow by three to four percent this year. But the fourth quarter numbers could be hit by the US ports lockout that has crippled trade with Asia.

The government said the reversal in momentum in the third quarter was mainly due to slower activity in the chemicals sector after an exceptional surge in the second quarter.

"The chemical sector can still be a wild card because of its volatile nature," said DBS Bank economist Kaan Quan Hon.

The government said goods-producing industries expanded 7.8 percent year on year in the third quarter, but services industries only grew 1.8 percent.

Lehman Brothers said it cut its full-year GDP growth forecast to three percent from 4.3 percent, seeing global growth staying weak and electronics, which accounts for about 60 percent of Singapore's exports, slowing.

"The weak GDP report suggests that momentum in Singapore's economy is now rapidly slowing from the strong pace set in the first half of the year," said Lehman economist Graham Parry.

Analysts in a Reuters poll had forecast on average 6.82 percent growth for the third quarter versus a year ago.

MONETARY POLICY SEEN UNTOUCHED

"In my opinion, the government has to revise its full-year GDP growth forecast downwards closer to three percent," said Nizam Idris, an economist at IDEAglobal.

But he did not expect a change in monetary policy because the Singapore dollar had been holding in the stronger half of its trading band. That gave the authorities room to let the currency drift to the weaker half, which could boost exports.

While preliminary third-quarter growth proved dismal, some economists said it may be to early to fret.

"I won't be too concerned yet about the quarter-on-quarter decline of 10.3 percent. I expect the numbers to be quite volatile after three consecutive quarters of positives," said Suan Teck Kin, an economist at OCBC Bank. In the second quarter, Singapore's GDP grew 3.7 percent on the year and 13.2 percent on an annualised quarter-on-quarter basis. The economy shrank two percent last year after a blazing 10.3 percent growth in 2000.

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