The International Monetary Fund (IMF) has made the steepest cut to its global economic growth outlook in three years.
The move comes just a week after another major global body, the World Bank, trimmed its forecast.
The IMF now expects the world economy to grow 3.5 per cent this year, down from the 3.8 per cent it projected in October.
The cut is the biggest since January 2012, when the IMF lowered its growth projection that year to 3.3 per cent from 4 per cent amid forecasts of a recession in Europe.
The downgrade reflects a "reassessment of prospects" in China, Russia, the euro zone and Japan, which more than offset benefits of sharply lower oil prices.
The United States is the only major economy where growth projections were raised.
The IMF, in its quarterly outlook released on Monday, also cut its 2016 growth forecast to 3.7 per cent, from 4 per cent in October.
Last week, the World Bank lowered its global growth forecast for this year to 3 per cent, from 3.4 per cent in June; and to 3.3 per cent for next year.
"New factors supporting growth, lower oil prices, but also depreciation of the euro and the yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries," IMF chief economist Olivier Blanchard said.
Emerging economies also suffered, with the outlook for oil exporters Russia, Nigeria and Saudi Arabia hardest hit.
OCBC Bank head of treasury research and strategy Selena Ling said the IMF "jumped on the bandwagon like the World Bank's earlier paring of its 2015 global growth forecasts a few days ago, albeit with a somewhat smaller axe".
"Generally, the macro picture has not changed significantly. The risks flagged are also not new - the spike in financial volatility, intensifying geopolitical tensions and prolonged stagnation in Europe or Japan," Ms Ling said.
"Singapore, as a small open economy, will still suffer from the two-track global growth trajectory.
The impact will likely be felt most on manufacturing, including exports, whose growth up to the fourth quarter of 2014 remained generally lacklustre," she added.
"Leading indicators such as the domestic manufacturing Purchasing Managers' Index data recently slid back into the contraction territory, suggesting no near-term turnaround story.
In fact, the recent non-oil domestic exports (Nodx) data for December 2014 clearly showed Nodx to the US markets continued to contract."
Phillip Futures investment analyst Howie Lee said the local economy will be affected by growing headwinds this year, and that the latest IMF outlook "is unlikely to change the current situation".
But Barclays Capital economist Leong Wai Ho was more upbeat.
He noted that lower oil prices are a growth stimulus, but "the pass- through to growth is lagged, depending on when the stronger US investment cycle starts to provide more lift for Asia's exports.
That means, six months from today, multilateral agencies could be raising their growth forecasts again".
This article was first published on Jan 21, 2015.
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