In his New Year message emailed to the media, Lee said the growth rate was "better than initially expected". It topped a previous forecast by him in August of 2.5-3.5 percent growth amid global uncertainties.

"The European and American economies are stabilising," Lee said. "Asian prospects are still positive, but there are problems and tensions," he added, referring to the various territorial disputes in the region as well as tensions in the Korean peninsula.

He said the city-state's economy, seen as a bellwether for the region, is expected to achieve 2.0-4.0 percent growth in 2014.

Its gross domestic product (GDP) stood at Sg$345.6 billion ($273.25 billion) in 2012, according to latest official data.

Singapore's exports, like those of other Asian countries, had been hurt by slowing demand from the United States and Europe this year, although the situation in those markets has now improved.

In his message, Lee said the government was continuing to tighten the influx of foreign labour, amid discontent among Singaporeans over the large foreign presence in the tiny city-state of 5.4 million people. Only 3.84 million are citizens and permanent residents.

"We are taking a balanced approach, reducing but not cutting off the inflow of foreign workers," Lee said.

He said foreign workers were still necessary to "keep our economy running and to build critical infrastructure for Singaporeans".

Authorities have been phasing in various measures to tighten foreign worker inflows, including a new policy announced in September requiring companies to show proof they first tried to recruit local citizens before hiring foreign professional workers.

The city-state however continues to depend heavily on about 700,000 guest workers who are employed in construction and other sectors shunned by Singaporeans. More than 200,000 others work as domestics.

The discontent over foreigners -- who are accused by Singaporeans of competing with them for jobs, housing, schools and space on public transport -- spilled into general elections in 2011, when Lee's long-ruling People's Action Party garnered its lowest-ever vote count after more than 50 years in power.