Singapore's prime minister, Goh Chok Tong, says his country's economy has shrunk for the first time since 1985, with output falling one and a half per cent in the third quarter of the year.

Mr Goh told trade union leaders the economy was likely to remain depressed for another two years and the cost of doing business in Singapore would have to be sharply reduced if the country was to remain competitive.

A BBC economics correspondent says Singapore's export-led economy doesn't suffer from the weaknesses of many of its neighbours, but its businesses have suffered from the regional downturn.