The ability of the manufacturing sector to absorb both skilled and unskilled labour place it at the centre of the growth strategy of developing economies . Besides this feature, manufacturing sector is marked with higher labour productivity and tradability. Together these factors influence economists and policymakers to consider the manufacturing sector as the possible ‘engine of growth’ in developing economies. Nevertheless, several developing economies, except for some in East Asia, exhibit deviations from the manufacturing-driven structural transformation path and face a ‘premature deindustrialisation’ trend. Premature deindustrialisation indicates that before experiencing a deeper industrialisation phase, developing countries are turning into the service sector. Given the significance of the manufacturing sector, there is a rising concern that premature deindustrialisation might restrain the channels of growth in developing economies. These facts instigate us to suspect that the early deindustrialisation trend is restricting the economies efforts to break out of the middle-income status. Thus we examine the relationship between premature deindustrialisation and growth slowdown in middle-income countries. We begin our analysis by identifying premature deindustrialisation and growth slowdown phases in economies. To capture growth slowdowns episodes, we consider the method proposed by Eichengreen et al. (2012). Further, we propose a set of five conditions to identify the premature deindustrialisation phase. We attempt to solve the ambiguities related to identifying deindustrialisation and classifying a deindustrialisation episode as ‘premature’ with these conditions. The empirical findings indicate that the incidence of premature deindustrialisation increases the likelihood of experiencing growth slowdowns in middle-income countries. Furthermore, the study also finds evidence that increases in the employment share of high-productive service activities (such as financial, insurance and professional services activities) can reduce the probability of getting trapped in the middle-income status. In contrast, the rise in the employment share of market services (relatively low-productive service activities) might stall the growth enhancement process through structural transformation.