Singapore - Prime Minister Lee Hsien Loong expressed confidence Thursday in Singapore's ability to cope amid the uncertain global economic outlook but warned that "dark storm clouds have gathered."

In his annual May Day message, Lee cited the sub-prime mortgage crisis in the United States. "We must watch closely how the situation in the US unfolds, and be ready to respond if things take a turn for the worse," he said.

Buoyant industries such as tourism, construction and marine engineering will buffer the city-state from the effects of a possible US recession, he said.

Singapore's economy is still on track to grow by 4 to 6 per cent this year, he said, and many job vacancies are waiting to be filled in the manufacturing and services sectors.

"However the US financial problems play out, I am confident of our ability to cope," Lee said. "Our economic fundamentals are strong and we are in a strong position."

For now, the city-state's economy is still doing well although "dark storm clouds have gathered," Lee said.

With inflation at its highest in more than two decades, Lee said Singapore cannot shield itself completely from the worldwide economic difficulties.

The strong Singapore dollar has helped to maintain the purchasing power of workers' salaries, he said.

Lee also said there are enough supplies of food, notably rice. "We can buy what we need from many sources," he said.

The prime minister urged workers and employers to aim for sustainable wage changes this year, in anticipation of a year ahead that will be "much more challenging" than
2007.

"Realistic settlements will address the concerns of workers, and yet allow companies to respond quickly to sudden changes in the economic environment," he said.

The external turbulence "will put our solidarity under stress," Lee said. "But we must not end up arguing among ourselves, or, worse, quarrelling over how to divide what we have, or else we will all be worse off." (dpa)