The eurozone crisis is the main risk facing Singapore’s economy and financial system, the central bank said yesterday, warning the city-state to brace for “a more adverse turn of events.”
Ravi Menon, managing director of the Monetary Authority of Singapore, said any sharp deterioration in the eurozone, the city-state’s biggest export market, could hurt economic growth and lead to a drying up of bank credit.
“The key risk facing the Singapore economy and financial system is the ongoing crisis in the eurozone,” Menon said at a news conference.
Singapore could see a drying up of bank credit similar to the aftermath of the collapse of US bank Lehman Brothers in 2008 that hammered global markets, Menon said.
“Already, we have seen some retraction in eurozone banks’ trade finance activities in Asia, but local and global banks have stepped in to fill the void,” he said.
Singapore’s economy is on track to expand between 1.0 and 3.0 percent this year, down from 4.9 percent growth last year, he said.
However, economic growth could dip below 1 percent if the situation in the eurozone escalates, China’s economy slows down drastically or the US falls into a recession, he said.
The economy contracted by 1.1 percent in the second quarter from the previous three-months. Menon said average growth in the second half is likely to be slower than the first half.