Manufacturing remains Singapore' s biggest risk, warned Vishnu Varathan, senior economist at Mizuho Bank. " Recent purchasing manager' s index (PMI) surveys have remained above the key boom-or-bust 50 level, but just barely."

Tepid output is underscored by the absence of a recovery in exports due to poor global demand, he explained, and sentiment could remain dire amid fears over Greece leaving the euro zone and the mainland' s equity market massacre.

In May, non-oil domestic exports fell 0.2 percent on year, slowing from a 2.2 percent increase in April. Singapore' s economy is highly exposed to the global business cycle as a result of its vast trade and investment links, so external issues have a sizeable impact on the wealthy city-state.

Moreover, the domestic labor crunch is a key impediment to growth, particularly for the service sector, said DBS economist Irvin Seah, referring to recent foreign manpower restrictions.

" While unemployment is already below the natural rate of 2 percent, and job vacancies have been rising, Singapore' s employment shrank for the first time in nearly six years in 1Q15, driven mainly by a sharp moderation in service employment and a continued decline in manufacturing employment," he said in a Thursday report.

Meanwhile, a widening difference between the economy' s actual output and its potential output, known as the negative output gap, is also worrisome, Seah added.

" Slack in the economy has already pushed May core inflation to near zero at 0.1 percent on year [a new five-year low]. This decline in core inflation goes hand-in-hand with the widening negative output gap, both of which underscore the deceleration in growth."