He said the problems were challenging but believed that Singapore was in a strong position to address them.

In his traditional New Year message, he said Singapore enjoyed 'another year of robust expansion' and announced that the economy grew by 7.5 per cent last year.

This is at the lower end of the forecast of 7.5 per cent to 8 per cent, indicating slower growth in the fourth quarter.

Mr Lee noted the slowdown, but in looking ahead, said he was 'cautiously optimistic' for 2008.

Although the United States may go into a recession, he is confident its impact here would be offset somewhat by the strong momentum of Asian economies.

Singapore's economy is expected to grow by 4.5 per cent to 6.5 per cent this year.

Several major projects will also be completed, he noted, with the Singapore Flyer whirling to life in March and the inaugural Formula One race revving up in September.

But he cited in particular how the Government's focus will be on a trio of issues which impact on the everyday lives of people.

In health care, he said new hospitals and specialty centres will be set up, with more doctors and nurses to ramp up services, cut crowding and slash waiting times.

The Government will spend more in this area, and ensure health care remains affordable for all, he promised.

But that entails targeting subsidies at those who need help most, with the rich paying more than the poor.

'This calls for means testing. We already have means testing in nursing homes, and should now implement it for hospitals too,' he said, adding that the scheme will be discussed and finalised in the next few months.

On land transport, a review is under way, with attention especially on improving public transport so that more people take buses and trains.

'Our roads are getting more crowded and traffic jams are worsening. We have to lower the vehicle growth rate and step up measures to manage the demand for road space,' he said.

While there will be more Electronic Road Pricing to discourage car usage, it will be balanced by lower vehicle ownership taxes.

Ang Mo Kio GRC MP Lam Pin Min, who is on the Government Parliamentary Committees for Health and Transport, said the Government would have to explain the rationale behind these policies, which could 'cause pain to some and relief to others'.

He believes means testing is the fairest way to allocate resources, but said 'the devil lies in implementation - who should get more, who should get less'.

On education, PM Lee wants more Singaporeans going beyond the secondary school level and said more should receive a subsidised university education. That accounts for the increase in publicly-funded university places to take in 30 per cent of every cohort by 2015. He also said 'the case for a fourth publicly-funded university is already clear'.

These areas of attention follow major changes last year when the Central Provident Fund scheme was revamped; public sector salaries were raised; and the Workfare Income Supplement scheme was launched to top up salaries of older and low-income workers who stayed on the job.

Those changes came in booming times which saw a record number of jobs created, the lowest unemployment in almost a decade, and record investments.

But such successes also led to problems, he said, citing a shortage of prime office space, resource constraints and a tight labour market.

Inflation also picked up in recent months, causing concern for Singaporeans, he acknowledged.

But the new year looks bright: 'As long as we continue to work together and support each other, we can all look forward to a brighter future for our nation and for ourselves.'  THE STRAITS TIMES

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