MAS reveals three factors to watch in annual report

The Monetary Authority of Singapore has released its annual report which outlines three risk areas to watch for businesses in Singapore and across Asia Pacific

Insurance News

By Jordan Lynn

The Monetary Authority of Singapore (MAS) has released its annual report which outlines three risk areas to watch for businesses in Singapore and across Asia Pacific.

In a media conference at the launch of the MAS annual report, Ravi Menon, managing director of MAS, said that the regulator is wary of three particular factors.

“The global economy is headed for another year of lacklustre growth,” Menon said.

“Recovery in the advanced economies is hesitant and uneven. Economic activity is slowing in the emerging market economies.

“MAS is closely watching these developments, especially three factors that are key to the growth outcomes this year: one, Brexit and its implications; two, the shape of the recovery in the US economy; and three, slowdown in the Chinese economy.”

Brexit could “have more significant economic consequences over the medium to long term,” Menon continued, “but it is still too
early to tell what these implications might be.”

“There are several key elections taking place in Europe next year. They will determine the ability of governments to maintain support for structural reforms as well as for the European project.  Destabilisation of politics in Europe could impact global markets and global growth.”

Menon noted that the United States recovery offers businesses in Singapore and the region pause for thought due to the “composition,” of the recovery.

“US GDP growth is not generating as much trade as previously, with persistent weaknesses in business investment, including in IT. This has implications for export growth in Asia and in Singapore,” Menon continued.

“US consumption generates only around two-thirds the import demand that US investment does. So for Asia and Singapore, we need to see a recovery in US investment.”

Menon said that MAS does not expect “a hard landing” from China’s slow growth but “underlying vulnerabilities,” could continue. 

“The official target of 6.5% is quite attainable on the back of fiscal stimulus and continued credit expansion. 

“In fact, the risk is not of too low a growth rate but a growth rate that is achieved by adding to the underlying vulnerabilities in the Chinese economy: high and rising levels of corporate debt, industrial overcapacity and deteriorating asset quality in the banking system.”

In Singapore, Menon said that “economic growth remains sluggish,” which is set to continue.

“Real GDP growth came in at 0.8% in the second quarter on a quarter-on-quarter, seasonally adjusted annualised basis.

Growth in the first half of 2016 has averaged 2.2% in year-on-year terms,” Menon said.

“The economy’s performance in the second half of 2016 will not be too different from the first half. But there will be some month-to-month volatility in economic activity and the composition of growth will shift somewhat.”

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MAS drops capital provisions for insurers

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