SINGAPORE'S economy grew at the fastest pace in two years in the second quarter as an influx of bankers helped fuel the construction of offices

SINGAPORE'S economy grew at the fastest pace in two years in the second quarter as an influx of bankers helped fuel the construction of offices and apartments.

Gross domestic product expanded an annualised 14.4 per cent in the three months to June, up from a revised 8.8 per cent pace in the first quarter, the Trade Ministry said. That was more than the Government's July 10 estimate of 12.8 per cent and the 12.4 per cent median forecast in a Bloomberg survey.

The success of the Prime Minister, Lee Hsien Loong, in attracting companies - including Citigroup and Daiwa Securities - to expand operations or set up new ones is spurring the property and construction industries. The Government has raised its estimate for growth three times this year, as building activity and financial services shield the economy from a slowdown in electronics manufacturing.

"The key drivers of construction and financial services are spurring growth beyond expectations, and picking up the slack from manufacturing," Irvin Seah, an economist at DBS Group Holdings in Singapore, said. "Growth is more broad-based and making Singapore more resilient to volatile global cycles."

Singapore's construction industry expanded 17.6 per cent in the second quarter from a year earlier, accelerating from a revised 12 per cent in the first three months of 2007, according to Friday's Trade Ministry report.

From a year earlier, Singapore's $US134 billion ($159 billion) economy expanded 8.6 per cent in the second quarter after gaining 6.4 per cent in the previous three months. Economists were expecting 8 per cent growth.

The economy will grow between 7 and 8 per cent in 2007, the Prime Minister said in a televised speech on Wednesday. The Government had earlier estimated an expansion of as much as 7 per cent this year, after growth of 7.9 per cent last year.

"The driving factors underpinning the higher growth forecast are strong global demand in the biomedical, aerospace and marine industries, robust regional demand for financial services and a buoyant domestic property market," the Trade Ministry said on Friday.

Singapore is encouraging financial services companies to set up offices to develop the island as a hub from which banks and asset managers can serve clients across Asia, including India, China and the Middle East.

The Government has shaved 8 percentage points off the corporate tax rate since 2000 to be more attractive to investors, and was voted the most business-friendly economy by the World Bank and the International Finance Corporation this year.