SINGAPORE, Feb 28 — Singapore’s gross domestic product (GDP) growth this year is expected to be close to the mid-point of the 1.5 per cent to 3.5 per cent forecast, or a touch lower, said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS).
This is not a bad outcome and there is no need to stimulate the economy, said Menon at a fireside chat at the Citibank Asia Pacific Investors Conference yesterday.
If there is a sharper slowdown, Singapore’s “healthy” macroeconomic position will give the economy the resilience to absorb the shock. Singapore also has the policy space to respond to mitigate the impact, he said.
Menon also touched on the following points:
Inflation in Singapore continues to behave according to MAS’ expectations. MAS Core Inflation came in at 1.7 per cent year-on-year last month, within the central bank’s forecast range of 1.5 per cent to 2.5 per cent, which was announced in October last year.
The 2019 Budget is expected to have a muted effect on core inflation this year and next.
The immediate impact of trade tensions between the United States and China on the Association of South-east Asian Nations (Asean) is “clearly negative.” Korea and Taiwan seem to have benefited as alternative suppliers of goods targeted by the US tariffs. Malaysia, the Philippines and Vietnam also seem to have benefited, as shown by their strong export growth to the US in tariff-hit products, but these effects seem to be tapering off.
While there have been anecdotes of shifts in supply chain due to the trade tensions, so far, there has been no decisive pick-up in foreign direct investment flows into Asean countries.
Besides a fallout in trade between the US and China, the key risk in emerging countries in Asia is leverage. Leverage ratios have risen sharply in several Asian economies and this can be a source of financial instability, particularly if global growth were to slow significantly or interest rates were to rise sharply. For instance, households which have borrowed more due to low interest rates may be more vulnerable to shocks in housing prices
The world is generally more indebted today than it was prior to the global financial crisis, and policymakers need to ensure measures to support growth do not add to financial excesses in the economy. — TODAY
Source: The Malay Mail Online
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