Hong Kong CNN Business  — 

Singapore could be heading for a recession after it reported a big drop in economic activity in the second quarter of the year.

The wealthy city state is being hurt by the US-China trade war and is heading for its weakest annual growth since 2009, when the economy shrunk by 0.6% during the global financial crisis.

Singapore on Tuesday slashed its forecast for GDP growth in 2019 to between 0% and 1%. Previously, it predicted the economy to grow by between 1.5% and 2.5%.

The downgrade followed very weak figures for the April-June period, when GDP shrank by 3.3% compared to the first quarter of the year.

The outlook has weakened in part because of how much trade tensions between the United States and China have escalated, Singapore’s Ministry of Trade and Industry said on Tuesday.

Singapore is heavily reliant on exports and China is its biggest trading partner. The Chinese economy is growing at its slowest pace in 27 years.

The Ministry of Trade and Industry said it expected that Singapore will “likely to continue to face strong headwinds for the rest of the year.”

“With trade tensions between the US-China unlikely to abate anytime soon, we expect exports and trade-related services to push the economy into technical recession in Q3,” Sian Fenner at Oxford Economics wrote in a research note.