(SINGAPORE) The outlook for Singapore's economy remains subdued with no impending rebound in sight, the government said yesterday, even as the economy performed better in Q4 2011 than initially thought.

But a recession isn't imminent either, the government said. It kept its forecast of a 1-3 per cent expansion this year, while warning of risks that could derail Singapore's growth, such as a messy sovereign debt default in the eurozone or a sharp rise in oil prices due to tensions in the Middle East.

'Near-term indicators on a sectoral basis do not point to an imminent rebound in the Singapore economy,' Ow Foong Pheng, permanent secretary at the Ministry of Trade and Industry (MTI), told reporters yesterday.

Inventory adjustments in the global IT industry will continue to drag down growth in the electronics sector, while the uncertainty over the European debt crisis could hurt financial services activity, she said.

Still, 'we expect tourism-related services to provide some support to growth', backed by rising visitor arrivals, she added.

The latest export data for January is 'quite good', raising hopes that the economy will not shrink for a second straight quarter in Q1 this year, MTI director Thia Jang Ping said, adding that it was too soon to be sure.

'It's still too early to call on a sequential basis whether or not we will slip into a technical recession, but the January trade numbers give us some hope that we will not.'

Singapore's economy grew by 3.6 per cent year-on-year in Q4 2011, as estimated last month.

But the sequential decline in Q4 economic output from the previous quarter was less than expected, at a seasonally adjusted, annualised pace of 2.5 per cent - well below the earlier estimate of a 4.9 per cent quarter-on-quarter contraction.

The revision to the growth estimate was mainly due to a much smaller drop in manufacturing output than initially estimated. But it was partly offset by a downward adjustment to growth in services, especially financial services.

For the whole of 2011, the economy grew by 4.9 per cent, just above the earlier estimate of 4.8 per cent, but sharply lower than the revised 14.8 per cent expansion in 2010.

Some economists believe that the official growth forecast this year is too bleak.

'Despite the challenging external environment, we continue to expect the economy to bottom out in Q1 2012 before picking up steam in H2 on the back of support from pharmaceuticals and services,' said OSK-DMG Group economist Leslie Tang, who is forecasting growth of 4 per cent this year.

But MTI officials are not so bullish, saying that even if the worst risks are averted, 2012 growth isn't likely to be much higher than 3 per cent.

'We don't think there's at this stage serious upside' to the growth outlook, Mr Thia said.

With the government expecting the unemployment rate to be stable at around 2 per cent, the labour market is likely to remain tight, keeping inflation from falling quickly despite the slowdown. Inflation is expected to be 2.5-3.5 per cent in 2012, Ms Ow said.

Most economists expect the Monetary Authority of Singapore to maintain its policy stance of allowing the Singapore dollar to strengthen gradually against the currencies of its major trading partners at its next policy review in April.

Meanwhile, the lower perceived risk of a recession means that today's Budget is likely to focus on medium-term initiatives to restructure the economy rather than spending measures to boost short-term growth, said Citigroup economist Kit Wei Zheng.