"We remain convinced there is no recession in sight as the slowdown caused by the regional crisis will be offset by continued growth in the US and EU," SG said in report made available to Reuters.

The research house forecast that Singapore's Gross Domestic Product (GDP) would contract 1.1 per cent in the third quarter of this year, but recover to grow 4.3 per cent in the fourth quarter of 1998.

SG said Singapore would achieve an overall GDP growth of 2.7 per cent for all of 1998, well above a gloomier government forecast of growth between 0.5 to 1.5 per cent.

An increasing number of economists have forecast over the last couple of months that Singapore could expect to see its economy contract in the third and fourth quarters and barely see growth for the whole year, if at all.

SG said it expected Singapore'svital electronic sector, which accounts for some 70 per cent of non-oil exports, to recover in the fourth quarter of this year and demand for exports to go up as volume exports in the region grow.

"We are seeing evidence from suppliers to main disk drive manufacturers in Singapore of a recovery in volume production," the SG report said.

"Seagate, Singapore's second largest employer, has been surprised by the resilience of sales to Asian customers who account for 15-16 per cent of sales -- the same share as a year ago," the report said.

The report also said that Singapore's dependence on its neighbours was highly geared towards the region's export engines, not the domestic economy.

"While a third of Singapore's trade is with Asean (Association of Southeast Asian Nations), more than 80 per cent involves intermediate goods for export production and destined for G7 countries," the report said.

It said the EU and United States remained key export markers and should provide a buffer for lower exportdemand from Japan.

In its sectoral analysis, SG forecast the manufacturing sector would contract 5.5 per cent in the third quarter of 1998 but grow of 5.4 in the fourth.SG said it expected the commerce sector performance to contract 3.7 per cent in the third quarter after declining 4.8 per cent in the second.

It said growth in the the finance sector would slow to 0.1 per cent in the third quarter against 2.5 per cent growth in the second.

"We expect this sector to be the most severely hit after the commerce sector due to the regional slowing," it said.

"Specific areas include a decline in offshore banking activity, hurt by Japanese banks' domestic problems, causing them to reduce activities in Singapore and Hong Kong."

It said the arranging of financing out of Singapore was also slowing due to the impact of Asia's economic crisis on trade and investment projects.