Singapore- Singapore's export-oriented economy expanded 7.2 per cent in real terms in the first quarter despite a slowdown in the United States and turmoil in financial markets, the Trade and Industry Ministry said Thursday.

The growth over the same quarter a year ago was faster than the 5.4-per-cent gain seen in the last quarter of 2007, thanks in part to a surge in drug manufacturing.

On a quarter-on-quarter seasonally adjusted basis, Singapore's gross domestic product (GDP) expanded 16.9 per cent after declining 4.8 per cent in the previous quarter, according to the ministry's preliminary estimates.

The Monetary Authority of Singapore, the central bank, unexpectedly announced Thursday that it would allow the city-state's currency to appreciate to a record high against the US dollar as a cushion against inflation.

The Singapore dollar rose 0.9 per cent Thursday to 1.3628 against its US counterpart.

Inflation was "expected to remain elevated in the first half of the year," the central bank said, predicting it would be in the upper half of the 4.5-per-cent to 5-per-cent forecast range.

The key manufacturing industry grew 13.2 per cent last quarter from a year earlier, compared with 0.2-per-cent growth in the fourth quarter of last year.

The biomedical sector led the pack, reflecting the government's offer of tax breaks and other incentives to attract drug manufacturers. Construction, financial services and transport hub services also registered strong growth.

The construction sector was estimated to have grown by 14.6 per cent in the first quarter after a 24.3-per-cent gain in the fourth quarter.

The estimates are taken from January and February data with the results of the entire quarter released in May. (dpa)