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Signs of slow growth ahead for Singapore economy

The Singapore economy has been going through a rough patch for some time now, and the latest data points to continued slow growth ahead.

Export-dependent sectors like manufacturing have borne the brunt of challenging external conditions, but domestically oriented industries may not hold out for much longer, especially as weak business and consumer confidence dampen demand.

New estimates from the Ministry of Trade and Industry (MTI) indicate that the economy is projected to expand by 1 per cent to 2 per cent this year, in what could be the slowest year since 2009.

This is narrower than an earlier growth forecast of 1 per cent to 3 per cent. MTI pointed to risks weighing on global expansion, such as Britain's vote in June to leave the European Union, as well as a potential sharper slowdown in China's growth.

The first half of the year was already tough. The economy expanded 2.1 per cent in the second quarter compared with the same period last year, MTI said. But compared with the first three months of the year, growth in April to June was a meagre 0.3 per cent. The manufacturing sector, which makes up a fifth of the economy and has been shrinking for over a year, staged a small comeback in the second quarter and returned to expansion. But economists say this is unlikely to be sustainable as global demand is weak.

Meanwhile, the service sector - which accounts for two-thirds of the economy - grew 1.4 per cent in the second quarter, down from the 1.7 per cent growth in the first. This was due in part to a weaker finance and insurance sector, which contracted 11.2 per cent in the second quarter over the first quarter, following a 14.2 per cent quarter-on-quarter nosedive in the first three months of the year.

These outward-oriented sectors are more sensitive to the travails of global economic cycles. But even domestically oriented ones, like retail, have suffered.

There are few signs of a turnaround ahead, and this could be the Singapore economy's weakest year since the global financial crisis.

A version of this article appeared in the print edition of The Straits Times on August 13, 2016, with the headline 'Signs of slow growth ahead'. Print Edition | Subscribe