ALTHOUGH Singapore slipped into recession last year, its economic growth was still positive at 1.5 per cent, said Prime Minister Lee Hsien Loong.

It is, however, lower than the annual growth forecast of 2.5 per cent, owing to the severe fallout from the global financial crisis.

The anaemic economy dominated Mr Lee's New Year message yesterday, which outlined an outlook that continues to be 'highly uncertain' with the threat of a rise in retrenchments.

'We must therefore prepare for a difficult year ahead, and especially the first half of 2009,' he said.

'Our economy will probably contract further. More companies will be forced to downsize...I expect more retrenchments in the next few months. We must be psychologically prepared.'

There were 6,418 layoffs in the first nine months of last year, and analysts predict the figure in the new year could surpass the peak of 30,000 in 1998 during the Asian financial crisis.

Mr Lee, however, assured Singaporeans the Government will intensify its efforts to help companies and citizens cope with the crisis. The details will be in the Budget to be unveiled on Jan 22.

'The emphasis is still to protect jobs,' he said. 'We will do more to help companies to stay afloat and continue to employ their workers.'

Keeping a lid on business costs, such as rental and wage bills, was among the measures he highlighted, adding that more financing support for companies is under study.

These measures are on top of its swift response to the global crisis when it introduced some help schemes in December.

They include a Government-backed enhanced loan scheme for companies and a training scheme that gives bosses more money to retrain, rather than retrench, workers. More than 120 companies will send over 4,200 workers for training under this programme.

Mr Lee also pledged that there could be off-Budget measures if the need arises, saying: 'We have the resources, and the will, to do more to see Singapore through this recession.'

In the meantime, he cautioned against viewing Budget 2009 as a cure-all for the ailing economy.

'The Budget package will not restore our economy to high growth overnight. But our measures will moderate the impact on Singaporeans, and on our economy,' he said.

This is because the global recession, unlike the Asian financial crisis, is the worst in 60 years. It will take longer to recover, with several years of slow growth.

In the interim, Singapore needs to seek out new growth opportunities so that it emerges stronger after the downturn, Mr Lee said.

'Hence, the Budget will also contain measures to develop our competitiveness and build up new and long term capabilities.'

Elaborating, he said the Government will help companies build up their operations, and also encourage new businesses to grow.

But the Government can only do so much, said Mr Lee as he stressed the importance of tackling the crisis as one nation. He called on companies, unionists, and Singaporeans to help each other ride out the tough times.

Layoffs should be the last resort, he stressed and urged workers to upgrade their skills and take up even unpopular jobs in the marine and construction sectors.

Singaporeans can also look forward to new jobs from investment commitments which the Economic Development Board forecasts could exceed $10 billion this year.

Amid the economic struggle, Mr Lee also highlighted the security threat from terrorism. Referring to the recent Mumbai attack which claimed the life of Singaporean lawyer Lo Hwei Yen, he said: 'We all mourn her loss. We are doing our utmost to prevent something like this from happening here.'

Despite the turmoil, Mr Lee believes Singapore has good reasons to be 'quietly confident'. In his recent visits to Latin America, China and the Middle East, he said 'people admire what we have achieved, and were eager to learn from our experiences'.

'They were confident that we would pull through and wanted to pick up ideas from us,' he added.

Singapore's 1.5 per cent growth took analysts like Mr Chua Hak Bin by surprise. 'It is much lower than expected and this year is going to be equally rough, with job losses expected to exceed job creation,'' said Mr Chua, head of Singapore equity research at Citigroup.

sueann@sph.com.sg

Full text of PM's message: Review