Singapore's economy shrank by an annualised rate of 5.8% in the first quarter of this year, official figures show, after the drugs sector slowed.
Singapore's economic outlook is mixed
The drop in gross domestic product (GDP) was far worse than the markets had been expecting, and the weakest since the Sars crisis of 2003.
The government had already forecast that the pharmaceutical industry would see flat growth in 2005.
The sector has been hit by competition from generic drug producers.
Analysts had expected that Singapore's economy would only decline by an annualised rate of 0.8% during the first quarter, after 7.9% growth in the last three months of 2003.
"Excluding biomedical manufacturing, which saw wide production fluctuations in the first two months, activity in the manufacturing sector eased somewhat from the previous quarter but growth was still healthy," the Singapore Ministry of Trade said.
The manufacturing sector, including the production of drugs, recorded annualised growth of 3.0% in the first quarter, down from 14.1% in the final three months of 2004.
Services grew 3.5%, down from the 4.8% seen from October to December.
Analysts are divided on how Singapore's economy is performing in the second quarter, with some saying it will continue to struggle, while others believe an increase in electronics exports will drive a recovery.
Manufacturing accounts for more than a quarter of the country's economy, with the services sector making up about 63%.