Surprisingly poor gross domestic product (GDP) figures yesterday have raised the spectre of a prolonged period of economic pain for Singapore.
Growth was just 0.6 per cent in the July to September period compared with the same quarter a year ago, according to advance estimates from the Ministry of Trade and Industry.
This was sharply lower than economists' estimates of a 1.7 per cent expansion, and the weakest rate of growth since 2009 in the wake of the global financial crisis.
The economy shrank 4.1 per cent in the third quarter compared with the preceding three months - the biggest quarter-on-quarter slump since 2012.
The fact that Singapore is in for a protracted slowdown was borne out by the sombre tone of the Monetary Authority of Singapore's (MAS) latest policy statement, also released yesterday.
The central bank said economic growth this year will be slower than previously expected, and is "not expected to pick up significantly in 2017".
Still, the MAS stood pat on its zero appreciation policy for the Singapore dollar despite the lacklustre outlook. Economists say it is keeping its powder dry for worse times ahead.
"We read it as saving policy ammunition... to be deployed if necessary, possibly at the next policy meeting in April 2017," said OCBC economist Selina Ling.
She revised her full-year growth forecast for 2016 to 1.3 per cent, down from 1.9 per cent, joining several other private sector economists who slashed their forecasts for the year in response to the poor data.
The advance estimates - which took into account data from the first two months of the quarter - showed weakness in two key pillars of the economy, manufacturing and services.
While manufacturers have been under siege for some time on the back of flagging global trade, economists are also becoming concerned about the service sector. "The drag from (weak external demand) has now permeated into the core of the Singapore economy," said Ms Ling.
The service sector has now logged three consecutive quarters of quarter-on-quarter contraction. The last time this happened was during the global financial crisis, said ANZ economist Ng Weiwen.
"(This reinforces) our view that tough times are here to stay for Singapore, with growth running the risk of remaining stuck in low gear," he added.
A prolonged service sector slowdown will lead to more layoffs going into next year, given that the sector employs 72 per cent of the workforce, noted UOB economist Francis Tan. "We should be prepared for worse to come," he added.
The only sector that logged an uptick in output in the third quarter was construction, which grew 2.5 per cent over last year.
Government forecasters expect growth to come in at the lower end of 1 per cent to 2 per cent this year.