Singapore  - Prime Minister Lee Hsien Loong on Tuesday warned Singaporeans to brace themselves for dampened growth next year and a stagnant unemployment rate although the city-state has pulled out of the deepest recession in its history.

"We are now past the worst of the storm," Lee said at a union conference. "Our economy has rebounded sharply."

In the third quarter of 2009, Singapore's economy grew 0.8 per cent compared with a year ago, the Trade Ministry said Monday, prompting the government to raise its growth forecast.

Singapore's economy was now expected to shrink 2 to 2.5 per cent in 2009, far better than the contraction of up to 6 per cent predicted earlier.

As major world economies had stabilized, Singapore should also see "modest positive growth" in 2010, Lee said.

However, so far growth in the United States, Europe, Japan and China had been the result of government spending, he said.

"When the stimulus ends, their economies may slow down again," the prime minister warned. "If that happens, our growth will be dampened too."

Even with growth, Lee added, Singapore's unemployment rate, which stands at 3.3 per cent and is at its highest in four years, would stay up for some time as unemployment numbers tend to lag behind an economic recovery.

"Therefore, we must be psychologically prepared for dampened growth or in any event for unemployment to stay up," Lee said.

In the first half 2009, about 19,000 workers lost their jobs in the city-state.

Lee said the government would extend a wage subsidy programme for employers, which was set to expire in December, by six months.

The Jobs Credit scheme was introduced to curb further job losses during the recession.

Under the scheme, employers get subsidy payments from the government for any Singapore citizen on their payroll.  (dpa)