THE volatile global outlook has prompted private sector economists to downgrade their forecasts for Singapore's growth this year and the next.
They now expect the economy to expand just 3 per cent this year, down from an earlier forecast of 3.3 per cent.
The reasons behind the gloomier mood have been making headlines for weeks - the crashing oil price that is driving some producers to despair, a slowdown in China and the faltering economies in Japan and Europe.
Growth this year in the manufacturing, construction, wholesale and retail trade, and accommodation and food services, is likely to be lower than previously expected, said the analysts polled by the Monetary Authority of Singapore.
Economists have also lowered their growth forecasts for next year to 3.1 per cent, compared with an estimate of 3.7 per cent put out in September.
The poll, which was sent out on Nov 25, reflects views received from 22 analysts who closely monitor the Singapore economy.
DBS economist Irvin Seah said the downgrade for this year was expected, given the still tepid outlook for major economies such as Europe and Japan and slowing growth in China.
"This cautious sentiment has spilled over to the outlook for 2015," said Mr Seah.
He added that Singapore will be a "small boat in rough seas" amid volatility in financial markets next year.
Recent weeks have hinted at what may lie ahead, with plunging oil prices hammering currencies such as the ringgit, rupiah and
Russian rouble and sparking panicked sell-offs in markets around the world.
This heightened volatility "will persist in 2015... and is likely to spill over to the real economy and affect economic activities", said Mr Seah.
Net oil exporter Malaysia, Singapore's largest trading partner, has been hit hard by falling crude prices, with the ringgit slumping to historic lows.
A weaker Malaysian economy will affect Singapore, which is already seeing its own oil exports hurt by declining prices. Singapore's non-oil exports have also been weak, rising just 1.6 per cent last month over the same month last year - well below forecasts.
"Lower oil prices will not lift growth significantly because of external volatility... The net impact is still positive, but there will be some pain," said Mr Seah.
While plummeting oil prices have increased market volatility, they have also been a boon to consumers by lowering inflation here.
Survey respondents expect inflation for this year to come in at 1.1 per cent, down from September's estimate of 1.8 per cent, as petrol pump prices and electricity tariffs fall.
Worries about oil prices and global growth have spooked markets in recent weeks, but the decline in crude prices "still implies a big tax cut for consumers, especially in the developed world", said Credit Suisse economist Michael Wan.
Mr Wan, whose forecast of 3.5 per cent growth next year is more upbeat than most, said lower oil prices benefit net importers such as Singapore.
"People have also been too pessimistic about the impact of restructuring on Singapore... We do see signs that the service sector is picking up," he said.
Official forecasts tip growth to come in at around 3 per cent this year and between 2 per cent and 4 per cent next year.
Get a copy of The Straits Times or go to straitstimes.com for more stories.