A surprise contraction in Singapore's economy in the first quarter of this year shows that the wealthy island state continues to struggle, prompting Credit Suisse to call for more downgrades to the country's 2013 growth forecasts.
"Singapore clearly remains the sick man of ASEAN (The Association of Southeast Asian Nations) and, in the short term at least, must rely on a meaningful improvement in the global trade cycle to register a reasonable recovery," Robert Prior-Wandesforde, director, Asian economics at Credit Suisse said in a note on Friday.
The economist's comments come after advance estimates by the Monetary Authority of Singapore (MAS) showed that the trade-dependent economy contracted by 1.4 percent in the first quarter from the previous quarter, below a Reuters poll estimate of 0.7 percent growth. Year on year, the economy contracted 0.6 percent, worse than forecasts of a modest 0.2 percent growth. Despite the contraction, the country's central bank stuck to its outlook of 1-3 percent gross domestic product (GDP) growth for 2013.
Credit Suisse, meanwhile, is maintaining its below consensus forecast of 1.5 percent for full-year growth, but expects more analysts to continue to revise their 2013 GDP forecasts down.
"With the consensus estimate for 2013 GDP currently running at 2.5 percent... we highlight that this would imply, on average, a sizable 7.4 percent quarter on quarter seasonally adjusted annual GDP rise in each of the remaining three quarters of the year," said Michael Wan, research analyst at Credit Suisse, who thinks such a scenario is unlikely given that the economy hasn't seen that sort of a bounce since 2010.
Tim Condon, head of research Asia, ING Financial Markets, backed that sentiment, downgrading his full-year growth forecast to 2.5 percent from 3.5 percent in a note after the GDP figures were released Friday.
ANZ also revised its 2013 growth forecast for Singapore to 2.2 percent from 3 percent, economist Vincent Conti said.
But Wai Ho Leong, senior regional economist at Barclays Capital said it was too early to revise growth forecasts, because the data in the first two months of the year were weighed down by seasonal factors like the Chinese Lunar New Year in February and property cooling measures.
"February was really a seasonal abnormality, because of the Lunar New Year falling on different months this year and last year, so it meant deeper than usual contraction, plus most of our trading partners were closed for most of February - China, Korea and Taiwan," Leong said.
Leong expects the economy to pick up in the coming quarters and also thinks the first quarter advanced estimates could be revised upwards.
"If we do get a stronger second half, this [quarter] will be a distant memory," Leong said. "The housing transaction data are telling us that March saw a pick-up, which I think will feed into the final set of first quarter numbers that will be released in a month's time - so that should point us to a slightly stronger services, manufacturing performance."
Singapore's Purchasing Managers' index (PMI) rose to 50.6 points in March, showing orders expanded, reversing from a contraction of 49.4 in February.
By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter