Singapore's economy has grown for the first time in more than a year, raising hopes of an end to the worst recession in the south east Asian city state since the early 1960s.

Singapore's economic output was 3.9% greater in the April to June period than in the same period a year ago, official figures showed.

A lot will depend on what happens to the US economy

Joseph Tan, Standard Chartered economist

The increase represented the first year on year rise for five quarters.

Growth was fuelled by stronger demand for exports from Singapore, which depends heavily on sales to the US, particularly of electronics goods.

"The recovery that we have is really the result of better external demand," said Ho Meng Kit, Deputy Secretary for the Ministry of Trade and Industry (MTI).

Better prospects

The brighter picture has encouraged the government to raise its growth predictions for the year, with Singapore's gross domestic product (GDP) now forecast to grow by at least 3%.

Officials had previously put the minimum growth figure at 2%.

"A lot will depend on what happens to the US economy. Traditionally the government likes to be conservative," said Joseph Tan of Standard Chartered Bank in Singapore.

Singapore's economy shrank by 2% in 2001, and this year started poorly, with the economy contracting by 1.5% in the first three months.

Jobless

In spite of renewed growth, unemployment is likely to continue rising as more people are expected to enter the workforce, the Ministry of Manpower has said.

It sees an unemployment rate of about 5% for the second half of this year. Joblessness was 4.1% in June.

The economy would need to grow for six months in row before Singapore's recession can be declared officially over.

Exports

The return to growth "comes on the back of the recovery in the major economies and global electronics demand", the trade ministry said.

External trade grew 2.7%, in contrast to a contraction of 12% in the first three months of the year, official figures showed.

External demand accounts three quarters of Singapore's economic activity, with the US taking about a fifth of the city state's non oil exports.

Manufacturing, which makes up nearly a quarter - 22% - of Singapore's economy, expanded by 14% year-on-year between April and June.

Electronics output grew 1.8%, but the biggest improvements were in the pharmaceutical sector, the MTI said.