Singapore's disappointing economic showing in the first three months of this year has led economists to downgrade their growth forecast for the full year.
But the picture is not all gloomy, as they are also tipping lower inflation this year and a lift in economic growth next year.
The view from the private sector is that the economy will grow by 2.3 per cent this year, according to a poll of 22 economists and analysts by the Monetary Authority of Singapore (MAS) last month.
This is down from the 2.8 per cent growth they predicted three months ago, MAS said yesterday. The official forecast is for 1 per cent to 3 per cent expansion this year.
According to the MAS poll, economists now project manufacturing to expand by 1.2 per cent, a third of their earlier estimate.
They also tip wholesale and retail trade to grow by 0.9 per cent, just half the previous prediction.
Manufacturing makes up about a fifth of the economy, while wholesale and retail trade accounts for another 17 per cent.
"The growth trajectory for the entire year has been lowered due to weaker-than-expected growth in the first quarter," said DBS economist Irvin Seah. He cut his full-year growth forecast in April from 3.2 per cent to 2.5 per cent.
The main drag has been factory output, which slumped early this year due to a slowdown in China, the continuing recession in Europe and weak economic data in the United States, said Mr Seah.
This led Singapore's economy to grow just 0.2 per cent in the first quarter over a year ago, less than economists had tipped.
For the second quarter, economists expect a faster expansion of 1.5 per cent from a year ago, although this is lower than the 2 per cent they previously projected.
With manufacturing showing signs of revival, economists such as UOB's Mr Francis Tan are looking to a stronger economic rebound in the second half of the year. He kept to his 2013 growth forecast of 3 per cent, believing factory output will pick up pace and add to the resilient domestic-oriented industries.
These include financial services and construction, the economy's star performers in the first quarter. Economists have raised their growth forecasts for these sectors, which together make up about a sixth of the economy.
Despite recent market volatility over fears about the US Federal Reserve tapering its quantitative easing policies, Mr Tan does not expect the financial services sector to take a major hit.
"If US economic conditions improve enough to warrant the tapering, it should boost our export industries and translate into positive spillovers to the financial and other services sectors," he said.
Some relief is also in sight for consumers, with economists cutting their inflation forecasts to 2.8 per cent for this year on the back of stabilising car and home costs. This is lower than their earlier tip of 3.8 per cent and below the official forecast of 3 per cent to 4 per cent.
Core inflation, which excludes private transport and accommodation costs, is now expected to be 1.8 per cent this year, down from the 2 per cent previously tipped.
For next year, the economists polled by MAS expect Singapore's economy to grow by 3.8 per cent and inflation to be 3.1 per cent.
The boost to growth will come from a lift in exports and trade-related sectors, as global demand is expected to pick up more firmly next year, said Credit Suisse economist Michael Wan, who is tipping 3.5 per cent growth for 2014.