Singapore's economy contracted 2 percent in the third quarter and exports slumped 5.4 percent in the same period, raising the risk of the country slipping into recession.
With the GDP and trade data revealing the headwinds for the export driven economy, the Ministry of Trade and Industry slashed the 2016 growth expectations for the economy. MTI said the island nation's economy is expected to grow 1.0-1.5 percent this year, compared with the previous projection of 1.0-2.0 percent growth.
Analysts said the chances of the Monetary Authority of Singapore announcing monetary stimulus measures were higher than before. The Singapore dollar hit a 10-month low of S$1.4365 against the US dollar on Thursday.
However, MTI said its official position is that the economy will avoid technical recession. MTI Permanent Secretary Loh Khum Yean said GDP is expected to grow 1.0 to 3.0 percent next year, Reuters reported.
"Global economic conditions have remained sluggish, with full-year growth likely to come in marginally weaker than in 2015," Loh said.
"Sectors such as electronics, information and communications, and other services industries are likely to continue to support growth, while the wholesale trade, and finance and insurance sectors could continue to face external headwinds," MTi said.
Meanwhile, figures released by International Enterprise (IE) showed that Singapore's non-oil domestic exports (NODX) continued to experience slump. IE also said exports for the rest of the year are likely to remain gloomy.
Along with a continued drop in exports, the domestic consumption has also remained anemic, raising concerns that the downturn has legs. The MTI also said employment growth in the near term is expected to be weak.
However, IE said the outlook for the next year is better. "For 2017, global growth is projected to pick up slightly as compared to 2016, supported by improvements in the growth outlook for advanced and developing economies like the US, Japan, NIEs and ASEAN, it said.
On a year-on-year basis, the economy recorded a surprise jump with gross domestic product (GDP) expanding 1.1 percent compared the previous year.