SINGAPORE'S all-important export growth forecast has been downgraded again.

The Ministry of Trade and Industry (MTI) on Monday said that exports will now shrink 2 to 4 per cent, instead of growing 2 to 4 per cent as previously forecast.

Exports fell 5.5 per cent in the second quarter and 6.2 per cent in the first half.

Gross domestic product (GDP) increased 2.1 per cent from a year ago, higher than the MTI's July flash estimate of 1.9 per cent.

MTI said the electronics sector will remain soft in the second half due to weak demand for semiconductors.

The short term outlook for the pharmaceuticals industry is also weighed down by global trends of strong competition from generic drugs and delays in approvals for new drugs.

Mr Emmanuel Ng, currency strategist at OCBC, commenting on the Q2 estimates, told Reuters: 'After the PM's speech on Friday, the surprise isn't there anymore.

'But we have a lower non-oil export projection which is now a contraction. Combine that with the global growth slowdown and the buyback of the US dollar versus the majors, there is going to be near-term downside risk for the Sing dollar'.

Added Mr David Cohen, of Action Ecnomics: 'The figures are pretty much in line with expectations and consistent with the cautious statement from the Prime Minister on Friday.

'People are certainly nervous about the outlook of the second half, given that the US economy appears to be sputtering. There is nervousness about economies in the US, Europe and Japan, and although regional economics in South-east Asia generally held up well through the first half, everyone is holding their breath.

'I would be happy to leave the current (monetary) policy in place with gradual appreciation of the Singapore dollar given the uncertainty and economic outlook. I won't feel the need to adjust parameters for the exchange rate trajectory'.

The Singapore dollar, which climbed to its strongest in more than a decade earlier this year, has since slid and is Asia's worst performer this quarter amid concern growth will slow further, said Bloomberg.

The Singapore dollar was trading at 1.4085/86 to the US dollar after the data, from 1.4097/103 late on Friday.

Signalling a deeper slowdown, Prime Minister Lee Hsien Loong on Friday cut the government's 2008 economic growth forecast to 4-5 per cent from 4-6 per cent and said Singapore faced a tough year ahead as it was beginning to feel the impact of a US slowdown.

The island's manufacturing industry contracted 5.2 per cent last quarter from a year earlier, compared with a 12.7 per cent gain in the first three months of the year, according to MTI's report.

Services climbed 7 per cent in the second quarter from a year earlier, slowing from a revised 7.7 per cent pace in the previous three months.

The construction industry grew 17.4 per cent, easing from a rate of 16.9 per cent in the earlier quarter, according to today's report.