* Economy shrinks less than expected in Q1 final data
* Singapore sees some signs of bottoming out, no rebound yet
* Need for another govt stimulus package less likely
* Central bank comfortable with policy stance, SGD level (Updates with details, analyst comment)
By Nopporn Wong-Anan and Saeed Azhar
SINGAPORE, May 21 (Reuters) - Singapore's trade ministry said on Thursday there were signs the country's worst-ever recession is bottoming out after the economy shrank less than expected in the first quarter, prompting the central bank to say it was comfortable with the strength of the currency.
The government's cautious optimism tallied with recent comments from the world's top policymakers, though it said it was too early to predict a recovery as problems in the U.S. economy were competing with signs that the downturn may be bottoming out in Asia.
A government official also said the need for more stimulus spending was "less likely" after better-than-expected manufacturing output and financial services, and relatively low unemployment, in the first quarter. Singapore unveiled a $13.7 billion package in January to cushion the economy from the global downturn. "There are some positive signs of a bottoming out. But it is not clear that we have begun to rebound from the bottom," said Ravi Menon of the Ministry of Trade and Industry at a briefing, pointing to a slide showing green shoots and brown weeds.
As hopes for a global recovery grow, analysts said the Monetary Authority of Singapore (MAS) might not move to weaken the currency further, in line with other central banks that have paused from aggressive rate cuts.
"The MAS has very little incentive to weaken or to ease policy further," said economist Vishnu Varathan at 4CAST. "If we see a modest recovery or stabilisation, the question is whether they will begin to tighten in October," he said.
The Singapore dollar
The central bank, which next meets to review policy in October, said on Thursday the behaviour of the Singapore dollar band was consistent with its policy stance.
The currency has strengthened since the bank last month shifted the midpoint of the band lower to the then-weak level of the band, a move less aggressive than some analysts had expected.
The currency's strength should be seen in the context of the U.S. dollar's broad weakness against Asian currencies, MAS Deputy Managing Director Ong Chong Tee told a briefing.
Singapore's economy shrank at an annualised and seasonally adjusted rate of 14.6 percent in the first quarter, less than a Reuters median forecast for a 17 percent fall and also lower than preliminary estimates of a 19.7 percent drop, final data showed.
GDP fell 10.1 percent from a year earlier, also less than expected and a smaller fall than 11.5 percent reported in the earlier April data, but still the worst ever.
NOT PRETTY
The country's exports slipped back in April from March following two months of growth, reinforcing a view that while the worst of the downturn may be over, there is no clear recovery. April exports slid over 30 percent to the U.S. and Europe and fell 15 percent to China.
"The correlation between China's stimulus package and our exports is not as high as the correlation between G3 demand for our exports," said Menon, adding weakness remained in U.S. retail sales and housing, though Asian consumer confidence had stablised.
For a graphic on Singapore GDP and exports, please click on:
http://graphics.thomsonreuters.com/059/SG_GDP0509.jpg
The economy has shrunk for four consecutive quarters. If it starts recovering in the second half of the year, the government said full-year GDP could shrink 6 percent, at the high end of its forecast for a 6 to 9 percent contraction.
"The economy will be out of recession by the fourth quarter, returning to pre-recession levels by end 2010 or early 2011", said Wei Zheng Kit, an economist at Citigroup in Singapore.
"The data should convince sceptics that the most pessimistic scenario has been kept at bay." (Additional reporting by Kevin Lim and Candida Ng; Writing by Neil Chatterjee; Editing by Kim Coghill)