The Singapore economy grew by a higher than expected 7.6 per cent in the first half year, prompting the government to raise its growth forecast for the year to between 7 and 8 per cent.

Adding to the good news, some 111,000 jobs - the highest number ever - were added in the first six months, bringing unemployment to a low of 2.4 per cent. And this has translated to good wage increases and higher bonuses for workers as businesses are doing well.

Prime Minister Lee Hsien Loong, delivering the upbeat news on the economy in his traditional National Day message broadcast this evening, said this has been another good year for Singapore - after four "good years of growth".

With Asia on the rise and the number of mega projects which are underway, he is confident that Singapore is poised to take off and will be completely transformed within a decade.

PM Lee began his 10-minute address on an optimistic note, saying that Singapore have many things to cheer about as they celebrate their 42nd National Day tomorrow.

Looking relaxed against the backdrop of the city skyline, the PM who chose to deliver his address at the National Library instead of the Istana as in previous years, noted that Singaporean athletes and chefs are on a winning streak, local entreprenuers are blazing new trails and students here are excelling at all kinds of international events, and the nation is gearing up for new and exciting projects like the Formula One Grand Prix and the Integrated Resorts.

"Singapore is growing not just because of more investments or more workers. Our people are adapting and working smarter. We are organising ourselves more efficiently, and making better use of our resources. In short, we have increased our productivity," said Mr Lee.

"Our efforts to transform our economy are paying off. The global economy is continuing to change. If we keep on adapting and readapting to it, we can keep growing strongly for many more years."

Looking ahead, he said the conditions for Singapore to take off are favourable.

Asia has made much progress 10 years after the Asian financial crisis, and has become more developed and dynamic, powered by economic giants China and India, and a resurging Japan. The medium term fundamentals for Asia remain strong.

But PM Lee cautioned that even as Southeast Asia has regained its balance on the whole, it is not without problems.

Singapore, which is at the heart of a rising Asia, has many strengths to draw on. These include a clean and corruption-free society; a disciplined and well-educated workforce, a cohesive, multi-racial community and a capable and vigilant SAF and Home Team.

Many mega projects are underway - the integrated resort in Marina South, the banking and financial centre, and soon the new botanic gardens.

"There is buzz and excitement in the air, as our city changes before our eyes day by day. Even the National Day Parade this year is different and exciting. For the first time, it will be held on water at Marina Bay. It will be on the largest floating stage in the world, with the new city skyline taking shape around us," said Mr Lee.

"We are not just creating a new downtown, but building a first-class living environment for all Singaporeans. We are rejuvenating HDB estates where our people live, and linking the estates to parks and waterways. We are connecting the whole island with high-quality public transport, and every home with high-speed internet. All this will enhance the value of your homes, and draw our community closer together.

"Within a decade, our city and our whole country will be completely transformed. The world is taking notice. It will be a new Singapore, but with our own unique identity, and the can-do and never-say-die spirit of the Lion City."

However, PM Lee said that Singapore faces a major challenge to its social harmony and national cohesion, pointing to the widening income gap - here, and all over the world.

"With globalisation, hundreds of millions of unskilled workers are joining the global economy. They are pushing down wages at the lower end. Rapidly changing technology is also making jobs more complex. People with skills and high ability are in growing demand, and being paid more," he said.

"We cannot stop or reverse this global trend. But we can do a lot to help Singaporeans cope with it. We want everybody to benefit from Singapore's success."

"Our basic approach is to grow the economic pie. When companies expand, there will be more and better jobs for everyone. We will have the resources to maximise opportunities for all. We can give every child many chances to do the best for himself in life. We can also help every household to own a home of their own - in fact, our HDB home ownership programme is the best form of social welfare for Singaporeans."

Mr Lee said the government will be strengthening the social safety nets, through programmes like ComCare and Workfare to help the lower-income families.

He also cited the ageing population as another reason for the widening income gap.

This means that Singaporeans are living longer than ever. To help the elderly live comfortably, medical care must be affordable, the city must be made barrier-free, and public transport wheelchair friendly.

Mr Lee said he is aware that many older Singaporeans worry about whether they can make ends meet.

To them, he promised: "We are making changes to help you to work longer, earn more and build up your retirement savings. We will enhance the value of your HDB homes, which are a nest-egg for old age. We will improve the CPF scheme, so that you can enjoy a steady income and peace of mind in your golden years."

The PM also urged everyone to play a part in solving the problems, and take responsibility for themselves. The more successful Singaporeans must pitch in to help the weaker ones.

"The more you have gained from society, the greater your obligation to give back something to your fellow citizens. Let your giving come from the heart. Many Singaporeans have done so quietly. To grow as a nation, we need to be compassionate as well as competitive. As we spur one another on to perform and excel, we must also work together and care for those in need," he said.

Looking to the future, Mr Lee said Singaporeans have every reason to be confident about their future, given the favourable backdrop.

"The winds and tides are with us. Our spirit is high, and our ship is ready," he said in summing up his National Day message. "Let's seize the moment to sail ahead, into the bright and exciting future that we can already see. Together, let's transform Singapore, and make this a special home for every one of us."