Singapore Says Careful Global Action Needed to Support Recovery

By Joyce Koh

Oct. 26 (Bloomberg) -- Singapore’s central bank said international policy makers need to make sure their actions are “carefully calibrated” because the sustainability of the world’s economic recovery isn’t yet clear.

The global recession wasn’t of the “garden variety,” and withdrawing government stimulus measures too early or too late could cause problems, Heng Swee Keat, managing director of the central bank, said in Singapore today.

“There is no easy precedent and we have to be alert to new surprises,” Heng said. “While the outlook has improved, the sustainability of the recovery is not clear at this point.”

Singapore’s central bank said this month it will maintain a zero appreciation stance in its currency policy, after opting for a de-facto devaluation of the Singapore dollar in April to help reverse a collapse in exports. Central banks around the world have begun to indicate a willingness to raise interest rates as inflation returns with economic recovery.

South Korea’s central bank said today the economy expanded at the fastest pace in seven years, leading a regional rebound with China and Singapore as companies including Hyundai Motor Co. and Samsung Electronics Co. reported surging profits, boosted by exports. Asian stocks climbed.

“We can expect increasing inflow of funds into many emerging economies, including those in Asia, in search of yields,” said Heng. “Managing this inflow so that it supports growth and does not drive excessive asset inflation will be challenging and policy makers will need a variety of tools.”

Slower Growth

Over the next few years, Asia is likely to grow more slowly compared with the pre-crisis period, he said.

Heng also said Asia should focus on developing and spurring innovation in its financial services industry, as rules have already become more conservative after the Asian financial crisis a decade ago.

“Asia’s bigger challenge lies less in having more stringent regulations, but more in the development and innovation of financial services to complement its economic development,” he said, citing venture funds, private equity, and insurance and risk management markets.

To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net