The third-quarter’s contraction -- which comes after four quarters of unprecedented double-digit growth -- was below market forecasts for the economy to contract just slightly more than the 2.3 percent fall reported in the advanced estimate in early October.

The government also cut its forecast for full-year economic growth by half a percentage point to 8-8.5 percent, and cited risks for 2005 including a “sharp” slowdown in the sales of microchips at the core of the wealthy island’s exports.

“The narrowing of the forecast to the lower band reflects the slower growth in the third quarter as a result of recent developments such as lower-than-expected biomedical output as well as the uncertainty of higher oil prices,” the Ministry of Trade and Industry said in its economic survey on Wednesday.

“It also reflects the possibility of a further moderation of growth in the fourth quarter,” it said.

High crude oil prices could also hurt the global economy next year, the government said. But it stuck to a forecast of a 3-5 percent growth in 2005 -- a significant slowdown from 2004 which is expected to mark the fastest growth in four years.

“The broad theme of 3 to 5 percent growth next year is in line with expectations of a cyclical deceleration of the global economy. We’re going for 4 percent growth in 2005,” said Vasan Shridharan, senior regional economist at HSBC Bank.

The composite leading index, which points to economic activity three quarters ahead, shrank 0.7 percent in the third quarter after rising for five straight quarters, the ministry said.

Compared to the third quarter of 2003, gross domestic product was 7.5 percent higher in the third quarter of 2004, lower than the advance estimate of 7.7 percent, the ministry said.

Singapore’s 2004 growth, underpinned by exports of computer chips and pharmaceuticals, would be nearly on par with China, which was projected to grow 9.3 percent in a Nov. 2 Reuters poll of 10 economists. In 2003, Singapore GDP grew 1.1 percent.

Singapore’s trade-dependent economy has been supported by demand for products from drug makers such as GlaxoSmithKline Plc. , which recently expanded capacity for an active ingredient in its respiratory medicines in Singapore, and for high-end tech goods by chipmakers such as Chartered Semiconductor Manufacturing Ltd. .

As the global electronics cycle slides off its peak, manufacturing, which makes up a quarter of Singapore’s $95 billion economy, is expected to slow next year, economists say.

Signs of a slowdown have begun to emerge, reflected most recently by a surprise fall in manufacturing output in September, raising concerns that high oil prices may have curbed factory orders ahead of Christmas.

The economic survey showed goods-producing industries grew 7.4 percent in the year through the third-quarter, services expanded 7.2 percent, while the construction sector remained a drag on the economy, contracting 10.9 percent.

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