Thu, Jul 05, 2018 - Page 10 News List

Global growth risks have ‘significantly’ risen, MAS says


Tail risks to global economic growth have increased “significantly” in the past six months because of a pickup in inflation and trade tensions, Singapore’s central bank said yesterday.

“The world has clearly moved from trade tension to trade conflict,” Monetary Authority of Singapore (MAS) Managing Director Ravi Menon told reporters at the release of the bank’s annual report. “If this escalates into a trade war, all three engines of global growth — manufacturing, trade and investment — will stall.”

With the US threatening to slap higher tariffs on goods from China, Canada, the EU and others, concerns are mounting that the trade conflict will spread, undermining global growth. That is on top of risks from higher oil prices, rising global interest rates and a stronger US dollar.

Menon said the direct effects of higher tariffs would be limited, but the consequences would be “dire” if the conflict spreads.

Growth in Singapore’s export-reliant economy remains on a solid footing, but would be hit if global trade takes a knock.

Menon reiterated the MAS’ growth forecast of 2.5 to 3.5 percent for this year.

“If this keeps on going like this, we are certainly going to feel the impact, being such an open economy,” he said.

Global central banks, including the MAS, have started to tighten monetary policy in line with a stronger growth momentum.

The MAS uses the currency as its main tool rather than interest rates and in April shifted to a tightening policy stance. It expects core price growth to average in the upper half of its 1 to 2 percent forecast range this year.

“We’re not calibrating monetary policy to address tail risks, so for now, that’s not the case,” Menon said. “If the trade conflict becomes much more serious, then it’s no longer a tail risk, it becomes current reality, in which case monetary policy will have to take that into account.”

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