DBS Bank and global ratings agency Moody's Investors Service have sharply lowered their Singapore economic growth forecasts for this year to below 2 per cent.
They both blamed factors such as the recent stock market turbulence and China's economic slowdown for the hefty revisions - now below the official 2 to 2.5 per cent forecast range.
DBS also cited subdued global growth, especially in the United States. The bank slashed its 2015 forecast to 1.8 per cent, down from its forecast of 2.4 per cent in July.
CHINA RISK FACTOR
The Fed uncertainty is a known unknown, but the China-centric risks have ballooned.
MS SELENA LING, OCBC economist
DBS economist Irvin Seah said in an e-mail note yesterday that "external headwinds have intensified amid the uncertainties in the global environment".
Moody's Investors Service also dramatically downgraded its forecast to 1.7 per cent this year and 1.8 per cent next year - from the 3 per cent it had projected for both years in May.
Weaker trade and financial flows owing to China's slowdown have caused the ratings agency to slash its growth forecasts.
These latest forecasts are also well below the 2.2 per cent growth predicted on average by private-sector economists in a survey report released last week.
The Monetary Authority of Singapore sent out the survey on Aug 11, the day China devalued the yuan, and ahead of major stock market volatility.
Several economists contacted by The Straits Times yesterday said their forecasts will stay unchanged for now, though they said several "downside growth risks" could weigh down the economy.
"Our full-year growth forecast remains at 2.2 per cent for now," said OCBC economist Selena Ling, who is waiting to see how the US Federal Reserve will move on interest rate hikes.
"The Fed uncertainty is a known unknown, but the China-centric risks have ballooned - not purely from the China growth slowdown but the policy efficacy, unintended consequences and eventual exit strategy," she noted.
Barclays senior economist Leong Wai Ho said he is "comfortable" with his 2 per cent forecast, given that growth could be lifted by Christmas spending in the US.
CIMB Securities regional economist Song Seng Wun said: "We're seeing more bad news coming up, and obviously consumer and business confidence remains fragile."
Contractions in Singapore's export-oriented factory sector and the impact of weaker currencies on incoming tourist arrivals will drag on Singapore's full-year growth rate, he said, adding: "That said, my growth forecast for 2015 remains at 2.2 per cent."