Tue, Sep 18, 2007 - Page 11 News List

Officials warn of threat to growth of Singapore economy


Singapore's exposure to US subprime mortgage markets is small and contained, officials said yesterday, but warned that a resulting slowdown in major economies will affect the city-state's growth.

Singapore's central bank is "closely monitoring our financial institutions' exposure to sub-prime and other structured credit markets, at both the domestic and global levels," S. Iswaran, minister of state for trade and industry, said in parliament.

"Our exposure remains small and contained at this stage," Iswaran said.

He added that the central bank remained vigilant and was ready to inject liquidity into the banking system if needed.

Iswaran also said, however, that a loss of confidence and a general credit squeeze resulting from uncertainty in financial markets could impact the trade-dependent country.

"Strong growth in the region and the diversity of our export markets will provide us some buffer, but we are not immune to a slowdown in the major industrial economies," Iswaran said.

Iswaran said Singapore's economic growth forecast of 7 percent to 8 percent this year remained unchanged.

Singapore's local financial institutions do not offer mortgages to subprime customers, but have investments in collateralized debt obligations -- complex bundles of debt repackaged as securities -- 25 percent of which contain US subprime mortgages, Second Minister for Finance Tharman Shanmugaratnam also told lawmakers.

The total investment in CDOs by local banks amount to S$2.6 billion (US$1.71 billion), making up just 1 percent of the banks' capital base, Tharman said.

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