Singapore's economy expanded by 7.9 percent year-on-year in the fourth quarter of 2006, bringing full-year real gross domestic product (GDP) growth to 7.9 percent, higher than the 6.6 percent growth in 2005, the Ministry of Trade and Industry (MTI) said on Wednesday.

The whole year growth of 7.9 percent is higher than the previous estimate of 7.7 percent, which was announced by Prime Minister Lee Hsien Loong in his new year massage.

The MTI has also upgraded the 2007 economic growth forecast from 4-6 percent to 4.5- 6.5 percent.

"The global economic conditions have improved over the last few months," the MTI said in a statement, adding that "on the domestic front, forward-looking indicators point towards continued growth in the next few quarters."

It said that the global economic conditions have improved over the past few months, with fears of the housing market correction spilling over to the wider economy in the United States subsiding, as well as oil prices falling from their peak in 2006.

In the fourth quarter last year, the manufacturing sector grew 7.7 percent year-on-year, the services sector grew 6.6 percent while the construction sector grew 4.7 percent in the same period.

The consumer price index (CPI) rose 0.6 percent in the fourth quarter last year. For the whole year, the CPI rose 1.0 percent, up from 0.5 percent in 2005.