The $118 billion economy grew at a seasonally adjusted, annualised rate of 1.2 percent in the first quarter of 2006, the government estimated based on data for January and February. Analysts polled by Reuters had forecast 2.0 percent growth.

It was the slowest growth rate in four quarters -- after contracting at the start of 2005, Singapore's economy grew at annualised rates of 14.6 percent, 9.6 percent and 12.5 percent in the second, third and fourth quarters respectively.

The government, which is expected to call an election in the next few months, has forecast full-year gross domestic product (GDP) growth of between 4 percent and 6 percent this year.

"The full-year growth target can be quite easily met," said Joseph Tan, an economist at Standard Chartered Bank.

Most economists expected full-year growth to either come in at the upper end of that target range or exceed it, especially as they thought the first quarter figure was likely to be revised up when final (GDP) data was released.

"Growth of 1.2 percent looks good, bearing in mind that we are coming off three previous quarters of very strong growth," said Song Seng Wun, an economist at CIMB-GK Research.

The Singapore dollar was largely unchanged at 1.6040/45 per U.S. dollar while the benchmark Straits Times Index fell 0.56 percent in morning trade.

MONETARY POLICY REVIEW

Analysts expected the Monetary Authority of Singapore (MAS) to reaffirm its policy of allowing the trade-weighted Singapore dollar to gradually strengthen when its twice-yearly policy review is released on Tuesday at 8am.

"The status quo is going to stay because the economic growth momentum is still strong and there is still an upside risk to inflation," said Suan Teck Kin, an economist at OCBC Bank.

The MAS uses the currency rather than interest rates to keep a check on inflation. It has maintained a policy of "gradual and modest appreciation" in the currency since April 2004.

GDP in the first quarter was 9.1 percent higher from a year earlier, the Ministry of Trade and Industry said in a statement. Economists had expected a 9 percent rise.

The manufacturing sector, which makes up a quarter of the economy, expanded 16 percent from a year earlier, buoyed by strong growth in the electronics, biomedical and transport engineering clusters.

Output in the key electronics sector, which produces about one-third of the country's manufacturing output, has posted double-digit annual growth since October.

The services sector, which makes up over 60 percent of Singapore's economy, grew an annual 7.6 percent in the first quarter, underpinned by a faster pace of expansion in the wholesale and retail trade sector.

The long-ailing construction sector -- which has shrunk each year since 1999 -- contracted an annual 0.6 percent in the first quarter after a contraction of 0.8 percent in the fourth quarter.

The government expects the sector to recover this year due to several big-ticket projects, including two casinos and a revamp of the main shopping belt in Orchard Road."

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