Singapore's economy grew at a slightly faster pace in the first quarter than initially estimated, as factory activity remained robust, while an improvement in global demand prompted the government to upgrade its 2018 growth forecast.

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The economy grew 1.7 percent in the January-March quarter from the previous three months on an annualised and seasonally adjusted basis thanks to a slight upward revision in the services sector, revised final figures from the Ministry of Trade and Industry (MTI) showed on Thursday.

That was slower than the 2.1 percent expansion in the last quarter of 2017, but faster than the government's initial first quarter estimate, released on April 13, of 1.4 percent growth.

Despite the moderation in growth, the better than expected numbers prompted MTI to revise its full year growth forecast to 2.5 to 3.5 percent from the 1.5 to 3.5 percent announced previously.

"It shows that they're a little bit confident going forward," OCBC bank chief economist, Selena Ling said, adding that the revision is in line with Singapore's central bank's monetary policy change in April, when it tightened for the first time in six years.

Gross domestic product grew 4.4 percent in the first quarter from a year earlier, higher than the advance estimate of 4.3 percent growth.

The median forecast of 11 analysts in a Reuters poll predicted 1.4 percent quarter-on-quarter growth and a 4.3 percent annual expansion.

The expansion has been supported largely by the city-state's manufacturing sector, especially electronics, although the upward revision was mainly due to an improvement in the services sector numbers.

But as growth in Singapore's factory output starts to moderate and exports of electronics decline, analysts have started to question the outlook for output in the city-state.

Manufacturing and exports of electronics were one of Singapore's main drivers of growth last year, leading to a 3.6 percent rise in GDP in 2017 -- the fastest pace in three years.

The MTI repeated the threat of protectionist policies by the United States and the rise in global interest rates as clouding the outlook for growth.

Despite the risks, analysts say the resilience seen in economic growth keeps alive the prospect of another central bank tightening this year.

"If growth continues to improve gradually, or hold up the way it is doing right now, unless something adverse happens of the external front, are very likely on course for further normalisation in October," Brian Tan, economist, Nomura.