Private sector forecasters are hopeful the economy will do slightly better next year as global conditions stabilise, according to a new survey.
However, they have downgraded their outlook for this year as a hoped-for Christmas boost has failed to materialise.
Growth should come in at 1.9 per cent this year, down from a forecast of 2.2 per cent, according to economists polled by the Monetary Authority of Singapore (MAS) in its quarterly survey out yesterday.
The Trade and Industry Ministry had said in its latest economic report that growth for the year should come in at "close to 2 per cent".
On next year's prospects, the survey respondents expect the economy to grow at a slightly faster pace of 2.2 per cent.
"Developed economies should start doing more for global demand next year, and China's growth is expected to stabilise," said CIMB Private Bank economist Song Seng Wun. "So it should be 'less bad'... But then again, we've been saying that for the past few years."
He said consumers and businesses are going cautiously into the new year.
"There's still a question mark over the confidence of households and businesses, and this is not being helped by geopolitical tensions and terrorist events."
Barclays economist Leong Wai Ho said Singapore companies will continue to experience the same tight labour market and face similar revenue prospects next year as they have done this year.
Still, while the outlook is hardly buoyant, there are "no signs of systemic weakness", he added.
The MAS survey reflects the views of 22 analysts who monitor the Singapore economy.
For this year, financial services and insurance and wholesale and retail trade are likely to continue driving the economy. Both should expand at about 6 per cent this year, said the forecasters.
Meanwhile, manufacturing is expected to be the worst-hit sector this year and will likely remain soft in the first half of next year.
The industry, which makes up a fifth of the economy, is forecast to shrink 4.7 per cent for the whole of this year, down from an earlier estimate of a 2.7 per cent decline.
CIMB's Mr Song said the last three months of the year are traditionally the busiest for exporters, "but so far it's been relatively weak".
This is likely to spill over into next year and make the first quarter - usually the weakest for manufacturers - even softer than normal, he added.
Barclays' Mr Leong said factories in the region have been holding on to high levels of inventory, instead of producing new goods, owing to uncertainty over the outlook.
Even the usual year-end festive demand has not been enough to diminish these high inventories and "as a result, the Christmas effect has been completely masked", he added.
Mr Allen Ang, group managing director of Aldon Technologies, which refurbishes parts for flat panel and semiconductor manufacturers, said its sales dipped in the second half of this year.
He expects this to continue into the new year. "Our customers are not seeing strong orders coming in," he said.