Lee, who is also finance minister, told a budget debate in parliament the government had set the range at a base of 3.5 percent because of potential risks such as terrorism or another health epidemic.

Singapore's gross domestic product (GDP) grew just 1.1 percent last year, weighed down by the impact of the Severe Acute Respiratory Syndrome (SARS) in the first half.

But a global economic recovery has fuelled growth in demand for exports from the city-state, prompting the government to raise its GDP forecast this year from the original 3.0-5.0 percent.

While the GDP target is expected to be at the upper end of the forecast, the range was set to a low of 3.5 percent to factor in the possible effects of "unknown unknowns."

"You don't know what will strike you. It could be a terrorist attack, it could be another virus, it could be some totally unexpected mishap. So just to be careful, we are telling everybody: watch it," he said.

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