Singapore's chances of avoiding a slide into renewed recession are looking more and more bleak as the US recovery slows and war on Iraq looms.

The government announced its own nervousness about the tiny island economy's performance by slicing its target for growth this year to 2.0-2.5%.

The previous target of 3.0-4.0% is only three months old, having been set in August.

A rise in consumption tax from 3% to 5% scheduled for the end of the year was expected to kick off a spending spree.

But with, half of November over, the spending boom has failed to materialise.

Double dip?

The news came as US Trade Representative Robert Zoellick arrived on Monday in the South East Asian island state to try to iron out the final kinks in a bilateral free trade deal.

The US and Singapore have been trying to come to terms since November 2000, when Bill Clinton, then US president, and Singapore's prime minister, Goh Chok Tong, initiated the process.

Problems with access to Singapore's financial services sector have held things up, while the country's notoriously stringent strictures on, for instance, the import of chewing gum have also come in for criticism.

But sealing the deal would mean a lot for a country which sends one quarter of its exports to the US.

Nowhere to hide

Singapore's dependence on exports makes it especially exposed to the fortunes of its major trade partners.

Recent indications that consumers in the US were losing their shop-till-you-drop enthusiasm might spell trouble for Singapore.

Singapore's economic output was 3.9% greater in the July to September quarter than a year before.

But compared with the April to June quarter, the economy shrank more than 10%.

Manufacturing output shrank by more than 25%, having leapt by more than a half between March and June - the quarter that saw the country emerge from its worst recession since 1964.

US hopes

The government is still hoping that the US will pick up steam again next year, and is thus setting an optimistic growth target for next year of 2-5%.

For the moment, it is concentrating on massaging down the possibility of dropping back into contraction.

"We will not rule out the possibility of a double dip recession," said Friedrich Wu, direction of the Ministry of Trade and Industry's economics division.

"But we will not assign it a very high probability at this stage."