SINGAPORE : Singapore's economy has grown 7.5 percent for the whole of 2007, said Prime Minister Lee Hsien Loong in his 2008 New Year Message.

And he remains cautiously optimistic about the outlook for the new year.

Mr Lee also spelt out significant policy decisions in the areas of healthcare, land transport and education Singaporeans would have to face in 2008.

Singapore has enjoyed another year of robust expansion, although the fourth quarter saw slower growth.

The high growth has benefited all Singaporeans - a record 172,000 jobs have been created between January and September and unemployment is down to 1.7 percent, the lowest in almost a decade.

In 2007, the economic development board drew in a record S$16 billion of fixed asset investments in manufacturing and projects generating S$3 billion of total business spending in services.

For 2008, Mr Lee said he is cautiously optimistic.

The US may go into a recession because of the financial market problems and a US downturn would affect Asia too.

But he believes the impact on Singapore would be offset somewhat by the strong momentum in the dynamic Asian economies.

For Singapore, 2008 will see the realisation of several major projects, among them the inaugural F1 Singapore Grand Prix.

The first F1 night race ever will flag off in September.

All things considered, Mr Lee expects the Singapore economy to grow by 4.5 percent to 6.5 percent in 2008.

He however noted that inflation has picked up in recent months and this has caused concern to Singaporeans.

PM Lee said: "There are several reasons for this. First, the GST rate went up to 7 percent in July. However, the GST Offset Package has buffered that fully for lower-income citizens, who are receiving much more in offsets than the extra GST they have to pay. Second, IRAS has revised up the Annual Values of HDB flats. This will push up the Consumer Price Index, but in reality does not affect the 95 percent of HDB households who own their homes, and so do not pay any rents.

"Third, prices of food and energy have increased worldwide. This affects us directly, because we are a small and open economy, which imports all our food and fuel. But we are doing what we can to lessen the burden on Singaporeans, for example, by encouraging NTUC FairPrice and other supermarkets to find new sources of supply and offer house brands of basic essential items, and helping low-income families through U-Save and other rebates."

Michael Palmer, MP - Pasir Ris-Punggol GRC, said: "From the ground we are already hearing people talking about the cost of living going up, food especially, basic necessities like rice, milk, bread. These people feel the pinch everyday. PM mentions, in his message, about the shoppers at Orchard Road. That may not be totally representative about the way people are feeling. It may be year-end bonus but when you look at the year forward and the rising cost of living, they have to deal with their monthly salaries and less that their money can buy."

Prime Minister Lee assured Singaporeans that the government has not forgotten the concerns of the people, particularly retired Singaporeans, about rising prices.

He added that with the strong economy this year, government revenues have been buoyant and so finances permitting, the 2008 Budget should have something more to help older and needy Singaporeans.

Mr Palmer said: "I would like to see more put into the WIS scheme. I think that is a great scheme. It encourages employment all around, particularly in a good employment environment."

While tackling immediate cost issues, Prime Minister Lee reminded Singaporeans of the need to continue to focus on long term strategies and he highlighted the significant policy decisions in 2008.

In the area of healthcare, the health ministry will expand the public sector health capacity to meet the growing needs and rising expectations of an ageing population.

Mr Lee said: "The Government will spend more on healthcare to expand and upgrade services, and keep healthcare affordable for all. We need to deploy our resources wisely, and target subsidies at those who most need help. Higher-income patients should co-pay a larger share than poorer patients. This calls for means-testing. We already have means-testing in nursing homes, and should now implement it for hospitals too."

The Health Ministry will discuss and finalise the means testing scheme over the next few months.

Another challenge - making public transport a choice mode of travel and, parallel to that, the need to update policies on car ownership and usage.

Mr Lee said: "Our roads are getting more crowded and traffic jams are worsening. We have to lower the vehicle growth rate and step up measures to manage the demand for road space. We need to enhance the ERP and extend its coverage so that driving costs significantly more, but we will balance that with lower vehicle ownership taxes. Free flowing traffic is an important factor in the quality of urban life in Singapore."

The third issue is education.

New paths will be opened for the young to make the most of their talents, including expanding the university sector and having of a fourth publicly funded varsity.

The government is increasing public-funded university places to take in 30 percent of every cohort by 2015.

And while the form is still being studied, the case for a fourth publicly-funded university is already clear.

The Prime Minister said Singapore will be tackling these three issues in 2008.

And he is confident that as long as Singaporeans continue to work together and support each other, they can look forward to a bright future for the nation and themselves.

Mr Lee wishes all Singaporeans a happy and fulfilling 2008. - CNA/ch