A year marked by global protectionist tensions ended on a sluggish note for the Singapore economy, which grew by 1.9 per cent year on year in the final quarter of 2018 - the weakest quarter of growth in three years.
This was lower than the 2.4 per cent growth in the previous quarter and came in under the Government's own flash estimate of a 2.2 per cent expansion.
With several key economies turning in bleaker forecasts for this year, experts expect muted growth in 2019.
The Ministry of Trade and Industry (MTI) is maintaining its forecast range of 1.5 per cent to 3.5 per cent for the year ahead, but now expects growth to come in below the mid-point.
MTI said the economy grew 3.2 per cent for all of last year, slowing from 3.9 per in 2017.
MTI permanent secretary Loh Khum Yean said the external demand outlook has weakened slightly since November, with the United States, China and the euro zone economies forecasting moderate growth this year.
At the same time, there is now the added threat of a sharper-than-expected slowdown in China and a worsening of its trade conflict with the US dragging down Singapore's economy.
A no-deal Brexit, in which Britain exits the European Union without a withdrawal agreement, has reappeared as a downside risk for the first time since the 2016 referendum. "There is uncertainty because negotiations are dragging on, and there is no clarity. This could potentially introduce trade frictions between the UK and its trading partners," said Mr Loh, adding that Britain is an important trading partner of Singapore.
Should the downside risks materialise, investor sentiments may take a hit, he said.
Meanwhile, after two years of strong growth, the manufacturing sector is also likely to slow down significantly, said MTI, as the global demand for semiconductors weakens.
Manufacturing grew 5.1 per cent year on year in the fourth quarter compared with 3.5 per cent growth in the preceding quarter.
But there are bright spots for Singapore. Domestic demand may remain strong, with the labour market supporting private consumption, said the chief economist of the Monetary Authority of Singapore Edward Robinson.
The construction industry is also likely to see a turnaround, said MTI, holding out hope for a sector that has been shrinking for three consecutive years.
The 1 per cent shrinkage that the construction sector recorded in the fourth quarter of last year marked an improvement over the 2.3 per cent contraction it recorded in the previous quarter.
The spate of building contracts awarded in the second half of 2016 will start to boost the sector's performance this year, said UOB economist Barnabas Gan.
HSBC economist Chen Jingyang said while it was a surprise to see the earlier flash figures revised downwards, she noted the optimism towards domestically oriented service sectors such as infocomms, education and health. Infocomms expanded 6.1 per cent in the final three months of last year, surpassing the 5.4 per cent growth in the preceding quarter. She said: "All things considered, growth momentum is slowing in Singapore."
UOB's Mr Gan said: "The negative spillover effects of any external factors can pose significant risk. After all, Singapore does not have a relatively strong domestic economy. We are an export-dependent economy and a price taker."
