(SINGAPORE) With optimism finally surfacing among businesses here after six quarters of gloom, the latest BT-UniSIM Business Climate Survey now predicts that Singapore's economy will grow by up to 5 per cent in the present quarter.

A variety of companies, 172 in all, were polled in October on their sales, profits and orders or new business in the third quarter, as well as their business outlook for the coming six months.

Business prospects improved greatly, leaping 33 percentage points from last quarter to a positive 5 per cent net balance (the difference between the proportion of optimistic firms and those who were not), for the first time in six quarters.

The turnaround was driven mostly by foreign and larger firms. While pessimism did fade across the board, among small firms the gloomy still outnumbered the upbeat, and local firms appeared to be split down the middle.

Over the survey's 14 years, its business prospects indicator has proven to closely correlate to the change in Singapore's gross domestic product (GDP) in the following quarter.

As such, survey director Chow Kit Boey now predicts an expansion in GDP of between 2.3 and 5 per cent for the fourth quarter.

Ms Chow says that the advance estimate of 0.8 per cent growth in Q3's GDP would imply a full-year contraction of between 1.7 and 2.4 per cent, slightly more bullish than the official forecast of a 2 to 2.5 per cent contraction.

The Ministry of Trade and Industry will be releasing actual GDP figures for Q3 on Thursday.

Overall, the Q3 edition of this quarterly business survey showed that 'more and more firms here are rising out of the pit of lower sales, profits and orders,' Ms Chow says.

All three indicators had begun to pick up in the second quarter, but saw this pick-up gain momentum in the third quarter. Although the number of companies whose sales and profits fell in Q3 still outnumbered those whose sales and profits rose (thus yielding negative net balances), this was significantly smaller in Q3, than in the first two quarters of this year.

The net balance for sales rose 13 percentage points to negative 41 per cent, while that on profits rose 16 percentage points to negative 39 per cent.

For orders and new business, respondents reported an 18 percentage point increase - the net balance stood at minus 44 per cent.

Breaking down the survey responses according to the characteristics of each company, the survey found bigger firms to have performed better than small firms in terms of both sales and profits in Q3. But, small firms saw larger improvements in sales, thus narrowing the performance gap between them and larger players.

Small firms also reported substantial gains in new orders or new business, outperforming larger ones on this indicator.

But, though large firms have turned optimistic, small firms remained pessimistic though to a lesser extent than they had been before.

Local firms outperformed foreign firms in sales and orders or new business, though the latter group fared better on profits.

Performance by sector indicated that the financial and business services sector, much-maligned after last year's credit crunch, has regained strength, displacing the construction sector as the star performer in the third quarter.

Firms providing financial and business services posted the best overall performance in orders and new business.

Small and foreign firms in this sector also outperformed their peers in other industries on all the indicators too.

For future quarters though, the best business prospects overall reside in the manufacturing sector.

Most optimistic among small firms were those in the manufacturing sector, while for large and local firms, the financial & business services sector was viewed as providing the best business prospects in the next six months. Among foreign firms, those in commerce held the best business prospects.