Weaker US and other economies, high oil prices and a slowing of the global information technology (IT) industry are among the main factors behind the expected slowdown, the Monetary Authority of Singapore (MAS) said.

Over the longer term, the MAS also predicted a gradual rise in structural unemployment in the city-state as its manufacturing-driven economy shifts up to more sophisticated industries.

"Looking forward, some slowdown in the pace of expansion is inevitable. The Singapore economy is now transiting to a slower rate of growth following four quarters of double-digit growth," the MAS said.

"Thus, while the economy will continue to grow next year, its pace will slow to a more sustainable rate, approaching the economy's potential trajectory."

The central bank maintained its forecast that gross domestic product (GDP) will grow 3.0-5.0 percent in 2005 after 8.0-9.0 percent this year, which comes off a low base of 1.1 percent in 2003 when the economy was hit hard by the Severe Acute Respiratory Syndrome (SARS) regional epidemic.

"This forecast is predicated on some slowdown in global IT demand and weaker growth in the external economies," the MAS said.

"In sum, whilst the Singapore economy is set to achieve fairly strong growth in 2004, the growth prospects for next year are somewhat more uncertain.

"Among the emerging risk factors are a global IT downturn, a worsening of the oil situation and a slowdown in China."

The central bank's projections came after government figures released last week showed GDP slowed sharply in the third quarter to 7.7 percent year-on-year, down from 12.5 percent in the three months to June.

On a quarterly basis, GDP declined by 2.3 percent when compared with the second quarter.

The MAS said the projected slowdown should be viewed in perspective as GDP had expanded rapidly in the first nine months of the year, growing by 9.2 percent between January and September.

The central bank emphasised that an expansion of 8.0-9.0 percent this year would make Singapore one of the best performing economies in the region.

"The slowdown in the third quarter on a sequential basis should be viewed in perspective, coming (after) four quarters of unprecedented robust growth," the MAS said of the slower GDP growth in the three months to September.

"Economic activity remains sustained at a very high level and the underlying growth supports for the Singapore economy remain intact at this stage.

On the labour front, the MAS said the unemployment rate was expected to ease to 4.0 percent by the end of the year from 4.5 percent in the June quarter.

Manpower Minister Ng Eng Hen had said over the weekend the unemployment rate would fall to 4.0 percent or lower due to the economy's strong performance in the first six months of the year.

The MAS report, which also reviewed the changing dynamics of the local labour market over the last two decades, noted structural changes in the economy had pushed up the city-state's natural rate of unemployment to 3.0-3.5 percent from 2.9 percent in the early 1980s.

"This increase largely reflects the ongoing structural adjustments in the economy as it shifts towards more capital- and technological-intensive production," it said.

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