The Republic's economy expanded more than economists estimated last quarter, averting a recession even after the central bank refrained from monetary stimulus as it sought to contain elevated inflation.

Gross domestic product rose an annualised 1.8 per cent in the three months to Dec 31 from the previous period, when it contracted a revised 6.3 per cent, the Trade Ministry said in a statement this morning. The median of 11 estimates in a Bloomberg News survey was for a 1.6 per cent expansion.

GDP increased 1.1 per cent in the fourth quarter from a year earlier, the Trade Ministry said today, compared with the median estimate for a 1.4 per cent gain in the Bloomberg survey. For 2012, the economy grew 1.2 per cent, less than a quarter of 2011's pace.

The World Bank last month raised its outlook for emerging nations in East Asia, citing a recovery in China. The expansion in Singapore, among the first in South-east Asia to report GDP numbers for last quarter, signals the region may follow in reporting resilient growth as the global recovery quickens.

"If there's any plus, we can say, one year down the road, and despite the fiscal cliff, the United States economy is in a slightly more stable growth trajectory," said CIMB Research economist Song Seng Wun. "The Chinese economy looks to be in a slightly firmer growth track."

Aside from Europe's sovereign-debt crisis, Asian nations also face threats to expansion from the impact of more than US$600 billion (S$734 billion) of spending cuts and tax increases slated to take effect in the US this year. The Senate passed a bipartisan budget deal yesterday to avert some of the measures, which has yet to be accepted by the House of Representatives.

Prime Minister Lee Hsien Loong on Dec 31 reiterated a forecast for the economy to grow 1 to 3 per cent in 2013. The island is in a "new phase" of growth where it must adjust to a slower expansion than it has become accustomed to, he said. GDP increased an average of about 6.3 per cent in the decade through 2011.

Manufacturing shrank 1.5 per cent from a year earlier in the three months ended Dec 31. But services provided some positive news, rising 1.5 per cent from a year earlier, while construction expanded 5.9 per cent. BLOOMBERG

Analyst reactions

It's a pleasant surprise we managed to avoid a recession. We expect Singapore to grow 2.1 per cent in 2013. Even though we had originally expected Singapore to go into recession in Q4, we thought it would have been short-lived.

- Joey Chew, Barclays


We escaped recession by the skin of our teeth because Q2, Q3 numbers were revised lower. On the positive side, there is a rebound in momentum.

- Selena Ling, OCBC


The Q4 numbers were a surprise partly because of what the prime minister said. We thought there would be a technical recession.

- Michael Wan, Credit Suisse

TODAY