Prime minister Goh Chok Tong said gross domestic product shrank 1.5 per cent in the year to the third quarter of 1998 and was likely to remain weak for the next couple of years.

In full-year 1997, Singapore's GDP expanded by 7.8 per cent.The economic outlook remained stormy and there was a one-in-five chance of a second financial "typhoon" hitting the region, he said, adding that Singapore needed to take drastic measures to deal with the economy's worrisome deceleration.

In September, the jobless rate shot up to 4.5 per cent from just 2.3 per cent in June, preliminary government statistics showed. During Singapore's last recession in March 1986, unemployment hit a high of six per cent.

"The Singapore economic growth to remain weak for a couple of years," Goh said.