MORGAN Stanley has slashed its forecast for Singapore's growth next year on the back of a worse-than-expected global slowdown.
It now expects the economy to shrink by 2 per cent next year, after tipping a 0.2 per cent expansion previously.
This is the most bearish forecast so far.
Citigroup's Kit Wei Zheng is the only other economist who has predicted an economic contraction next year, with a forecast of -1.2 per cent growth.
Singapore's full-year economic growth has not dipped below zero since the dot-com bust in 2001, when it shrank 2.4 per cent.
'The global recession is likely to be deeper than expected' and Asia will probably not emerge unscathed, said Morgan Stanley's managing director and India and Asean economist Chetan Ahya.
He expects India, Korea, Indonesia and Australia to be the worst-hit countries in the region, because they have seen strong credit growth in recent years and are running current account deficits. The sudden liquidity crunch has led to a sharp decline in capital inflows and caused a spike in the cost of capital.
Countries that are likely to pull through most strongly in the coming recession include Malaysia, China and Taiwan, he said.
The bank has also cut its forecast for global growth next year to 1.7 per cent, from an earlier estimate of 2.5 per cent.