The risks of a sharp downturn in the global economy are rising as troubles mount in emerging markets and growth in advanced economies remains lacklustre.
This was the sombre message underlying a new report from the World Bank, which has cut its forecast for global expansion this year to 2.4 per cent, "roughly... the same insipid pace we experienced last year".
The latest prediction is down from a January forecast of 2.9 per cent. Economists say the lacklustre world economy will continue to weigh on small and trade-dependent Singapore, where the manufacturing sector has been mired in recession for the past year.
According to the World Bank report, risks to growth have risen since the beginning of the year.
The high levels of private-sector borrowing in several emerging and developing economies are a key vulnerability as they increase the risk of credit crises, said World Bank chief economist and senior vice-president Kaushik Basu.
Meanwhile, there are doubts over the effectiveness of aggressive monetary policies aimed at boosting growth in developed countries.
Commodity-exporting emerging market and developing economies have also struggled to adapt to lower prices for oil and other key commodities.
The World Bank cut its forecast for United States growth this year to 1.9 per cent from 2.4 per cent last year, as the recovery in the world's largest economy continues to be patchy.
China, another major global growth driver, will manage to maintain an expansion rate of 6.7 per cent, but the bank sees this slowing further to 6.3 per cent by 2018.
"Against this backdrop of weak growth, pronounced risks and limited policy space, policymakers in emerging and developing economies should put a premium on enacting reforms which, even if they seem difficult in the short run, foster stronger growth in the medium and long run," said the World Bank report.
Sluggish global growth is already weighing on Singapore's economy.
Trade agency IE Singapore made a sharp downward revision to its forecasts last month and now expects non-oil domestic exports to decline between 3 per cent and 5 per cent this year, from an earlier forecast of 0 to 2 per cent growth.
ANZ economist Ng Weiwen said Singapore is likely to experience a structural slowdown in its goods trade in the coming years, given shifting global trade dynamics.
He cited trends in countries such as the US and China, where suppliers are increasingly sourcing for goods domestically instead of looking abroad. This is likely to persist even if global growth becomes stronger, he added.
However, Mr Ng noted that Singapore's trade in services is expected to be more resilient, as regional demand continues to grow.