"The impact will be significant at least in the next couple of quarters. It is a very intense outbreak," Lee Hsien Loong said in a video interview posted on his Facebook page.
"I can't say whether we will have a recession or not. It's possible, but definitely our economy will take a hit," Mr Lee said in remarks made to media at Singapore's main Changi airport.
Mr Lee said business at the airport had suffered with flights down by a third.
Singapore has in effect banned all visitors from China, its biggest source of tourists, while some countries have advised against travel to Singapore which has one of the highest virus infection tallies outside China at 58.
Its manufacturing and trade sectors may also be hit by widespread economic disruptions in China due to the outbreak.
The Asian business hub had just been showing signs of recovery from its lowest growth rate in a decade last year — a paltry 0.7% — when the outbreak spread to the city-state in late January.
Singapore is due to release final fourth-quarter growth data on Monday, and economists are anticipating revisions to its 2020 growth forecast range of 0.5-2.5%.
On Tuesday, the government is set to roll out a hefty package of budget measures to cushion the economic blow from the epidemic, with some analysts expecting it to run its biggest deficit in over a decade.
Economists at Citi and Maybank expect a virus relief package of at least S$700 million ($505 million).
In other world updates:
$605m to contain spread
Hong Kong leader Carrie Lam pledged HK$4.7 billion ($605 million) to the city's Hospital Authority as it grapples to contain the spread of coronavirus.
Ms Lam, the former British colony's most unpopular leader since it returned to Chinese control in 1997, also announced measures to try to alleviate the burden on businesses and residents already hit by months of anti-government protests.
Vietnam port bars cruise ship
An AIDA Cruises ship with more than 1,100 European passengers cancelled plans to visit Vietnam after a provincial government enforced a directive barring those on cruise liners that were in China recently from disembarking due to coronavirus concerns.
The AIDAvita cancelled its docking plans in Quang Ninh after the local government notified the liner it would turn away passengers, according to a representative with the province’s maritime authority.
Malaysia taking action
Malaysia will announce a stimulus package on Feb 27 to mitigate the economic impacts of the outbreak, the finance minister said.
Assistance will be given to the affected sectors, Minister Lim Guan Eng said in a statement. The government said on Tuesday the stimulus package would be earmarked for the aviation, retailing and tourism industries.