Singapore, Dec 31 (IANS): Singapore's economy grew 3.7 percent in 2013, which is better than initially expected, Prime Minister Lee Hsien Loong said in his new year message Tuesday.

The official forecast of the government at the beginning of the year was 1-3 percent. It was later revised to 2.5-3.5 percent following stronger-than-expected growth in the second quarter thanks to the strength of the manufacturing sector.

Lee said the Singapore economy is expected to grow by 2-4 percent in 2014, according to Xinhua.

Economists said that Singapore was likely to get a boost from rebounding developed economies such as the US and Europe, but that domestic factors such as the tight labour market and rising business costs could dampen growth.

Lee said that median salaries in 2013 grew by 3.9 percent in real terms and the pay packets of the lower income group also became fatter.

"This means better jobs and new opportunities for workers. It also means that we can do more to make ours a gracious city for all," he said in the new year message.

Lee also said that the city state is making steady progress in addressing some pressing issues such as housing, healthcare and education.

The queue of first time buyers of public housing flats, which have been built and sold by the government to a majority of the resident population, shortened, housing prices have stabilised and targeted subsidies have made homes more affordable, he said.

The government is also investing in education, including in pre-school education. It is also expanding its major illness medical insurance programme to cover all Singaporeans, including those with pre-existing illnesses.

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