UPDATE 1-Singapore may avoid recession on Q2 GDP upgrade-reports

(Adds details, analyst's comment)

SINGAPORE, Oct 9 (Reuters) - Singapore may avoid a technical recession when it reports third quarter GDP as second-quarter numbers are likely to be revised upwards, Prime Minister Lee Hsien Loong said on Tuesday, according to local media reports.

Singapore is scheduled to release third-quarter gross domestic product data on Friday that will likely show the economy contracted quarter-on-quarter following a 0.7 percent seasonally adjusted and annualised decline in April-June, a Reuters poll showed.

But if second-quarter economic data is revised upwards to a positive figure, the city-state will avoid a technical recession, which is commonly defined as two quarters of sequential decline.

"I think that the second-quarter numbers may look a little better than the first estimates. So you might technically avoid a technical recession," the Straits Times website quoted Lee, who is currently in New Zealand, as saying.

"If the second-quarter numbers turn out to be positive then technically (a recession) wouldn't happen for a while. But you are talking about growth of around 1, 2 percent. We don't have a lot of margin for error," Lee added.

Leslie Tang, an economist at OSK DMG in Singapore, said the upward revision to second-quarter GDP probably came from services as manufacturing has been weak amid the global slowdown.

"I still think MAS is going to ease policy slightly," he added, referring to the Monetary Authority of Singapore's half-yearly monetary policy statement, which will be released on Friday at the same time as GDP data.

Singapore's manufacturing sector contracted for a third consecutive month in September as new orders fell further, the country's Purchasing Managers' index (PMI) showed, in line with other export-driven Asian economies facing tepid demand in Europe and the United States.

The drop in the September PMI reading followed weak manufacturing and exports data for July and August that were worse than expected.

MAS, Singapore's central bank, is expected to ease monetary policy by slowing the local dollar's pace of appreciation, according to a Reuters poll.

(Reporting by Kevin Lim; Additional reporting by Saeed Azhar; Editing by Kim Coghill)

((Kevin.Lim@thomsonreuters.com)(65)(6403 5663))