(MENAFN - AFP) Singapore on Friday cut its growth forecast for this year again after the economy shrank more sharply than expected in the third quarter as exports were hit by a slump in global demand.
The Ministry of Trade and Industry said it now expects growth of 1.5 percent in 2012, the bottom end of the 1.5-2.5 projected earlier this year, which was itself a revision from 1.0-3.0 percent initially tipped.
It warned the final figure could actually come in even lower and also projected tough times in 2013 as problems in the key export markets, especially Europe, continue to rattle demand.
Trade-driven Singapore's economy grew 0.3 percent in the July-September quarter from the previous year, but shrank 5.9 percent from the previous three months, the ministry said.
The quarter-on-quarter shrinkage was much steeper than the 1.5 percent fall that was anticipated.
"The pullback in quarter-on-quarter growth momentum was largely due to the decline in externally-oriented sectors such as manufacturing and wholesale trade," the ministry said.
The manufacturing sector, a key pillar of the economy, contracted 9.6 percent quarter-on-quarter, reflecting softer global demand for Singapore's exports, led by electronics.
A separate report by the trade promotion body International Enterprise Singapore said the city-state's main non-oil exports shrank 3.2 percent year on year in the third quarter, reversing growth in April-June.
The drop was driven largely by a 16.5 percent plunge in exports to Europe, which is grappling with a debt crisis.
Exports to the struggling US market fell 7.5 percent during the quarter, the report said.
Like the rest of Asia's export-driven economies, Singapore's performance is influenced by demand from major overseas markets and even more so in the case of the city-state, which has a smaller domestic base than its neighbours.
"Singapore's economic growth is expected to remain subdued for the rest of 2012. The electronics manufacturing cluster would continue to be weighed down by tepid external demand," the trade ministry said.
It warned that 2012 growth may even be lower than 1.5 percent "if the weakness in the externally-oriented sectors persists" into the final quarter.
Growth next year would depend largely on the performance of the US and European economies, the ministry said, suggesting 2013 would see expansion in the range of 1.0-3.0 percent. The figures are well down from the 4.9 percent expansion seen in 2011.
"The global economic outlook is still clouded with uncertainties. In particular, there remain concerns over the extent of the fiscal cutback in the US and potential escalation of the ongoing debt crisis in the eurozone," it said.
"Should any of these risks materialise, Singapore's economic growth could come in lower than expected."