According to the Monetary Authority of Singapore's (MAS) latest Survey of Professional Forecasters, economists expect the Singapore economy to grow by 2.9 per cent this year -- up from their previous median estimate of 2.3 per cent in June.
The upgrade comes after the Singapore economy expanded by a better-than-expected 3.8 per cent in the second quarter, compared to a year ago. This was much higher than the median forecast of 1.5 per cent reported in the June survey.
The government also raised the country's growth outlook for the year to 2.5 to 3.5 per cent from an earlier forecast of 1 to 3 per cent.
According to the quarterly poll, GDP growth in the July to September quarter is now estimated at 4 per cent. This is higher than the 3.5 per cent that was reported previously.
Economists said the upgraded outlook for Singapore's economy stems from a few reasons - recovering growth in the US, a bottoming out in China and a brighter economic picture in the Eurozone.
They said the recent market volatility is unlikely to have a crippling effect on Singapore's growth.
But some said other risks remain.
Mizuho Bank's senior economist, Vishnu Varathan, said: "Let's begin with the US. One thing that's been fading into the background is the debt ceiling crisis. They've not resolved that as of October. That could lead to another bout of shakiness in the markets. We can't discount that.
"The other one is China. While the incoming data has been encouraging, China is still walking a very tight rope. So they're not going to go on a no holds barred credit binge anytime soon. So whilst they're trying to balance policy, the net effect may be rather variable, so it could lead to soft patches as well."
On inflation, economists have also reduced their median estimate for this year's consumer price index to 2.5 per cent, compared to 2.8 per cent reported in the June survey.
For Q3 2013, headline inflation is projected at 2.1 per cent. However, MAS core inflation is expected to come in at 1.9 per cent in 2013, slightly higher than the 1.8 per cent in the previous survey.
Standard Chartered Bank's economist, Jeff Ng, said: "We see limited upside from demand-pull inflation at the moment. The recent cooling measures for the housing market are expected to moderate housing inflation further.
"And for the COE prices, even though they're high, they're likely to be dampened by high base effect. So we will watch out more for supply side inflation where wages could go up and that could put pressure on core inflation to go up this year."
Meanwhile, economists expect certain sectors of the economy such as the finance and insurance sector as well as the wholesale and retail sector to fare better than others in the second half of the year.
Growth in the finance and insurance sector is expected to climb 10.6 percent compared to the previous 6.1 percent forecast in June, while wholesale and retail trade is forecast to increase by 3.5 percent compared to 0.9 percent in the previous poll.
Jeff Ng said: "We look for improvement in manufacturing, especially the electronics in terms of the biomedical sector. For the services sector, we still look for the finance and business services sector to perform very well and in line with the their stellar performance in the first half."
Economists also expect the MAS to stick to its current policy stance of a gradual and modest appreciation of the Singapore dollar.
Nineteen economists took part in the quarterly survey conducted by MAS in August.