Economic figures released on Thursday showed the Singapore economy contracted by 2.5 per cent in the fourth quarter of last year.
This is compared to the previous three months, and better than earlier estimates.
As the US economy improves and supply disruptions arising from the Thai floods and the Fukushima crisis start to fade, some economists are of the view that Singapore will not slip into a technical recession next quarter.
Barclays Capital senior regional economist Leong Wai Ho said: "The possibility of another contraction remains remote in our view.
"We're past the bottom of the mid-cycle slowdown and if you look at indicators like IP (industrial output) in terms of momentum, they're actually bottomed out in December.
"December was a very strong month for IP. I think that momentum can carry us forward into Q1. (But) I think we haven't stopped worrying about growth even though we've passed the bottom."
And although latest trade figures have firmed up with external trade expanding 2.1 per cent in the fourth quarter, reversing a decline of 1.8 per cent in the previous quarter, the government remains conservative, and is sticking to a full-year GDP forecast of between one and three per cent for 2012.
Ministry of Trade and Industry Permanent Secretary Ow Foong Pheng said: "For Singapore, near-term indicators on a sectoral basis do not point to an imminent rebound in the Singapore economy.
"Inventory adjustment in the global IT industry will continue to weigh on the electronic cluster. This will have a negative spillover effect on the precision engineering cluster.
Economists also expect the Monetary Authority of Singapore to maintain its stance of gradual appreciation of the Singapore dollar.
"The central bank thinks that the October monetary policy decision remains appropriate and the next policy is scheduled for review and announcement in mid-April," said Edward Robinson, assistant managing director (Economic Policy) at the Monetary Authority of Singapore.
Full-year GDP growth for 2011 came in at 4.9 per cent.
On a quarterly basis, Singapore's fourth quarter GDP contracted 2.5 per cent, mainly dragged down by the manufacturing and financial sectors which contracted 11.1 per cent and 4.4 per cent respectively.
The construction sector declined 2.2 per cent quarter-on-quarter, while growth in the services industries was generally flat.
The wholesale and retail trade sector expanded 10.2 per cent while the transportation and storage sector contracted 2.9 per cent.
Economists said a rebound could be seen as early as March.
But this is threatened by inflation risks.
DBS Bank economist Irvin Seah said: "The upside risk to inflation is certainly higher than a few months ago.
"Previously we were looking at inflation easing to three per cent, but right now, given what's happening in the Middle East, the rising labour costs, which has become a problem for companies, and also the high chance that companies will pass on this higher labour cost to consumers -- that essentially indicates significant upside risk to inflation in the next couple of quarters."
Official forecasts put inflation for 2012 at between 2.5 and 3.5 per cent, reflecting an easing from 5.2 per cent in the previous year.
- CNA/wk
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