TRADE Minister Lim Hng Kiang said growth could fall below the 2.5 per cent forecast this year due to the unprecedented fallout from global financial markets.
Mr Lim told the media yesterday: 'Nobody expected this to happen but the conditions have changed very negatively since September.
'If you ask businessmen, they were caught unawares by this change...so I am afraid the economy will come down lower than we expected.'
Mr Lim was speaking after the Asean Economic Agreements Signing Ceremony held at the new Crowne Plaza hotel at Changi Airport Terminal 3.
The minister's warning comes on the back of a Monetary Authority of Singapore (MAS) poll just last week that painted a similarly bleak outlook.
The 17 economists and analysts told the MAS they expected 2.2 per cent growth this year - below the official forecast of 2.5 per cent.
Mr Lim said Singapore's small, open economy made it vulnerable to global market conditions but he maintained there was light at the end of the tunnel.
'Within the Singapore economy, there are some sectors which are holding up rather well,' he said, pointing to new manufacturing plants coming up next year and in 2010, that will boost production capacity and help grow the economy.
'We are looking at these investments coming on stream because we have been successful in attracting new flows of investments in the last few years.'
Mr Lim also addressed the government's monetary policy: 'Singapore's monetary policy is set by MAS and I think that is very conducive to growth...We're looking towards the Budget to have a fiscal policy that will also be pro-growth.'
Singapore's economy is in a technical recession - defined by two consecutive quarters of year-on-year contractions.
Last month, the Ministry of Trade and Industry cut its official forecast for this year to 2.5 per cent from the 3 per cent it stated in October - its fourth revision this year. The downgrade was mainly due to poorer than anticipated figures from the services and manufacturing sectors in the third quarter.
Manufacturing registered its sharpest fall since 2001, causing the economy to shrink 0.6 per cent over the previous year and 6.8 per cent from the second quarter.