The Republic is facing unprecedented factors in this recession and little can be done to mitigate the downturn, he said.

Its key non-oil exports fell 7.9 per cent in 2008 from a year earlier, hurt by a sharp decline in external demand amid a global economic downturn.

'There is very little we can do to try and mitigate the impact of such a major decline in external demand,' said Mr Lim, during question time.

'The economic downturn has spread to all sectors of our economy.'

Mr Lim also warned that job losses will increase and consumer sentiment will weaken as the manufacturing and financial industries slow, but he declined to give a forecast.

Singapore's loans may decline in the coming months as banks turn more cautious in lending amid a deepening economic slump, he added.

Still, Singapore's banks are not facing a liquidity crunch and the financial system remains 'fundamentally sound,' he said.

Finance Minister Tharman Shanmugaratnam is due to present the budget for the 2009/10 fiscal year to parliament on Thursday, expected to be expansionary to help combat the slowdown.

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