Singapore's economy took a turn for the better in the first half of this year, thanks largely to a resurgent manufacturing sector and stronger global demand.

However, the outlook for the rest of the year remains hazy, especially as sectors which rely mainly on local demand have yet to feel much of a lift.

The Ministry of Trade and Industry expects this year's economic growth to come in above 2 per cent. That sits at the higher end of its 1 per cent to 3 per cent forecast for the full year and surpasses last year's modest 2 per cent pace.

Trade-related segments, including electronics manufacturing and wholesale trade, boomed in the first half of the year on the back of a surge in global demand for semiconductors and related equipment.

Manufacturing, which makes up a fifth of the economy, expanded for the 10th straight month in May on the back of a global export rebound that has lifted demand for Singapore's shipments, particularly in electronics.

But there are signs that this pickup may be tapering off - May's expansion was not only slower than in April, but also fell short of economist forecasts.

In addition, this stronger growth has not been broad-based - sectors which rely largely on local demand, such as construction and food and beverage, remain mired in a slowdown.

It remains to be seen whether manufacturing sector growth can be sustained and eventually spill over to the rest of the economy.

The labour market is also still not out of the woods, though it, too, is showing signs of stabilising. Data from the Ministry of Manpower showed the number of workers laid off in the first quarter fell to the lowest level in over a year.

Chia Yan Min