The Singapore economy grew at a modest pace last year, but things could take a turn for the worse this year, with an increasingly bleak outlook.
Risks to growth are rising, with the global economic outlook growing gloomier since the start of the year, the Ministry of Trade and Industry (MTI) said yesterday.
MTI also warned that the solid wage growth enjoyed by Singaporeans last year is unlikely to be repeated this year, with the tight labour market likely to see some slackening ahead.
Last year, the economy grew a modest 2 per cent, the weakest rate of growth since 2009, and down from 2014's 3.3 per cent expansion, data from MTI showed yesterday.
The economy expanded at just 1.8 per cent in the last three months of last year, lower than the previous estimate of 2 per cent, as the manufacturing sector contracted further.
Growth this year is likely to stay within the 1 per cent to 3 per cent range, said MTI.
The sober message from MTI prompted several private sector economists to cut their forecasts for this year.
Bank of America Merrill Lynch economist Chua Hak Bin has lowered his estimate for full-year growth to 1.5 per cent, from 2 per cent, "given the more challenging and volatile economic conditions".
But other economists, such as UOB's Mr Francis Tan, said that the economy is unlikely to enter a recession this year.
Speaking at a press briefing yesterday, MTI permanent secretary Ow Foong Pheng warned that global growth this year is expected to be "only marginally better than 2015".
The slowdown in China, combined with Chinese and US companies turning away from imports, is likely to result in further pain for Singapore manufacturers, said Mrs Ow.
Lower oil prices have also hit rig-builders in the marine and offshore segment.
Global risks are also mounting - China's economy might slow more than expected amid ongoing reforms, while the short-term outlook for the rest of the region remains less than upbeat.
"With sustained low commodity prices and the beginning of the normalisation of US monetary conditions, regional countries could face sudden and large capital outflows, resulting in added pressures on their currencies and asset markets," said Mrs Ow.
The outlook for the construction sector has also dimmed due to a decline in contracts awarded last year, amid sluggish private sector building activity. The labour-intensive service sector, meanwhile, has been weighed down by manpower constraints, said Mrs Ow.
Barclays economist Leong Wai Ho, who cut his forecast for 2016 growth from 2.5 per cent to 1.5 per cent, said the economic outlook is "not improving anytime soon".
"It is a matter of time before the Government acknowledges that it needs to do something to provide short-term relief," he said.
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