Singapore is heading for a recession, or two straight quarters of economic contraction, after the economy shrank 2 per cent in the July-September quarter. Overall this year, the government reckons growth will be no faster than 1.5 per cent.

To make matters worse, high costs are beginning to bite. The elite joke about packing up and selling one overpriced home for several overseas. A recent UBS survey of top-earning millennials found Singapore’s youth among the least confident of achieving their wealth goals.

Singapore’s top problem is that global demand remains weak. That is taking its toll on export-oriented sectors, especially oil services companies, where there have been high-profile defaults. Finance is a drag too; the sector accounts for about one-eighth of GDP and is suffering from sharp declines. Big names like Goldman Sachs and Standard Chartered have pared back local operations.

The sense of vulnerability is acute because economic worries dovetail with political ones. Singapore has traditionally looked to the West on security issues and led its Southeast Asian neighbours in championing closer ties with the United States and Japan. At the same time, it relies on China for trade and tourism, which Natixis reckons amounts to 20 per cent of Singapore’s GDP.

That position looks particularly problematic following the election of Donald Trump as the next US president. The former reality star appears unwilling to maintain his predecessor’s pivot to Asia and pledges to roll back free-trade deals including the Trans-Pacific Partnership, an agreement Singapore saw as vital to US credibility in the region.

China is also ramping up its cheque-book diplomacy, buying off Southeast Asian countries one by one. Philippine President Rodrigo Duterte and Malaysian Prime Minister Najib Razak have both made a show of embracing China over old Western allies, motivated in part by a desire to attract more investment. That leaves Singapore increasingly isolated.