SINGAPORE - The Singapore economy expanded 2 per cent last year - slightly stronger than earlier estimates of 1.8 per cent - on the back of a turnaround in the manufacturing sector.

Growth is expected to come in at about the same pace this year, said the Ministry of Trade and Industry (MTI). Official estimates tip an expansion of between 1 and 3 per cent for 2017.

For the fourth quarter, growth accelerated to 2.9 per cent year on year - its fastest pace in more than five years as manufacturing and rebounded. This compared to the 1.2 per cent rise in the third quarter and the earlier estimate of 1.8 per cent growth for the fourth quarter.

Compared to the previous basis, the economy surged 12.3 per cent in the final three month of 2016, rebounding from a contraction of 0.4 per cent.

Factory output lifted the Republic's economic performance. The manufacturing sector grew 3.6 per cent, a reversal from a 5.1 per cent slide the preceding year. This was driven largely by the electronics and biomedical manufacturing clusters, even as transport engineering and general manufacturing continued to shrink.

Growth in the construction sector, meanwhile, was almost flat - logging just a 0.2 per cent uptick from 2015's 3.9 per cent. It was weighed down by sluggish private sector activity.

Services, which makes up two-thirds of the economy, expanded 1 per cent in 2016, also moderating from 3.2 per cent growth a year earlier.

MTI said the global economy is expected to pick up this year - in particular, the United States and Asean are likely to see stronger growth, even as China's economy continues to slow.

However, significant risks remain.

First, political risks and economic uncertainties have risen. For instance, even as Britain negotiates Brexit, upcoming elections in other euro zone economies may lead to further uncertainties over the future of the European Union.

There are also signs of mounting anti-globalisation sentiment, which could translate into greater protectionism and weigh on world trade.

Next, tighter monetary conditions in China could lead to a pullback in credit growth and investment spending, posing further drags to growth.

Against this backdrop, Singapore's externally-oriented sectors are expected to support growth this year, MTI said. In particular, the pick-up in manufacturing which started in 2016 is likely to continue, supported by a recovery in global demand for semiconductors and related equipment.

However, other sectors will continue to face challenges - such as the marine and offshore, retail and food services sectors.