Good morning. Welcome to MAS’ Annual Report press conference.
I want to focus on four key themes with a forward looking orientation: first, prospects for GDP growth, second, the outlook for inflation, third, MAS’ financial accounts, and fourth, maintaining high standards of financial regulation.
Let me begin with the economy.
Singapore’s GDP growth forecast range remains at 5–7% for now, but uncertainties have clearly increased.
As you know, economic growth took a sharp step-down in Q2 following the strong performance in Q1. First, disruption to regional supply chains in the aftermath of the Japan earthquake was much more severe than expected. Second, the rise in oil prices due to the unrest in the Middle East and North Africa has put a dampener on global demand. Singapore’s trade-related sectors bore the brunt of impact. Both manufacturing output and re-exports saw sequential declines in Q2. In year-on-year terms, GDP growth averaged 4.7% in the first half of this year.
Looking at the second half of this year, the prognosis for global economy has taken on a more cautious tone. There is more uncertainty in US and Europe compared to three months ago.
But we expect growth in our external markets to continue, albeit at a slow and uneven pace. In the US, weaknesses in housing and labour markets are persistent. Uncertainty over employment prospects will cap the strength of consumer spending. But business sentiments (as measured by the purchasing managers’ index) and new orders for capital goods point to continued economic expansion, though at a slower pace.