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SINGAPORE'S Ministry of Trade and Industry (MTI) announced on Tuesday that it has narrowed the gross domestic product (GDP) growth forecast for 2015 to 2.0 to 2.5 per cent, from 2.0 to 4.0 per cent.
MTI said the global economy performed weaker than expected in the first half of 2015 and for the rest of the year, global growth is expected to pick up gradually, although the pace of growth is likely to be uneven across economies. In particular, the advanced economies are expected to see a gradual pick-up in growth, while the growth outlook of regional economies has generally softened.
For the rest of 2015, the US economy is projected to grow at a modest pace, supported by private domestic demand. The eurozone economy is expected to improve in the second half of the year, with growth supported by the quantitative easing measures implemented since March. However, growth in the bloc will likely remain modest due to sluggish labour market conditions. In Asia, China's growth is projected to ease, weighed down by the on-going property market correction and excess capacity in the heavy industries. Growth in key Asean economies is likely to be weighed down by weaker demand from China as well as softening domestic demand.
"At the same time, several key downside risks in the external economic environment remain,'' MTI noted.
In China, there is the risk of a sharper-than-expected correction in the real estate market, which could have significant negative spill-over effects on construction and real estate investment activities. The recent sharp correction in China's stock market has also heightened the risks to China's growth. In particular, consumer sentiments and spending in China could be adversely affected if the correction in the stock market worsens.
In the eurozone, while Greece has averted the immediate risk of an exit from the bloc, there is continuing political uncertainty and the crisis could flare up again if the Greek government fails to adhere to the bailout terms.
Finally, with low commodity prices, the appreciation of the US dollar and anticipated normalisation of US interest rates, regional countries could face capital outflows and added pressures on their currencies and asset markets.
"In tandem with the expected gradual pick-up in the global economy, externally-oriented sectors such as finance & insurance and wholesale trade are likely to support growth in the Singapore economy in the second half of the year. However, sector-specific factors could continue to weigh on the growth of some externally-oriented sectors,'' MTI said.