Ravi Menon: Monetary Authority of Singapore’s Annual Report 2011/12 Opening remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Monetary Authority of Singapore’s Annual Report 2011/12 Press Conference, Singapore, 25 July 2012. *  *  *  Good morning. Welcome to MAS’ annual report press conference. I will focus on five key areas today. First, what is happening on the growth and inflation front; second, what does it mean for MAS’ monetary policy; third, how is MAS managing risks to our economic and financial stability; fourth, what MAS is doing to make our financial sector stronger; and fifth, how we are positioning Singapore’s financial centre for growth. Let me start with the economy. Growth and inflation Singapore economy remains on track to grow at 1–3% this year Singapore’s GDP growth averaged 4.2%1 in the first half of this year. But the growth momentum is clearly slowing. The average growth in the second half of the year is likely to be slower than in the first half of the year. This is not unexpected, and has been factored into whole year growth forecast of 1–3%. The global economy is slipping into a synchronised slowdown. The latest business surveys in all major jurisdictions have turned more negative. There is greater uncertainty in the US economy compared to three months ago, especially with respect to the labour market. The Eurozone remains mired in recession with no early end in sight. Financial market stresses have eased somewhat but the underlying vulnerabilities remain.

The latter have considerable social costs in the short run. Social discontent against them and the governments proposing them erodes the credibility of reforms and the authorities, increasing, in turn, the sovereign debt risk. Euro area, and particularly its Southern members, are facing a concern, whose solution bears consequences with economic and political implications for the future of all member states and the common currency. The reforms and policies undertaken by euro area authorities, individually or in a concerted manner, have important and direct implications for our economies. Experience to date has shown that our partners and their large banks have adopted an approach that maximizes their benefits as “owners”. Consequently, their decision-making is entirely conditioned by the fear of loss of stability and sovereignty that associates the current concerns of the economy and the parent bank. This has pushed these countries to take biased measures against our economies, risk rating investment in our countries at 100%. This decision-making, which is directly linked to the events taking place within the euro area, has practically transferred the issue of stability versus sovereignty in our economies. These policies represent a negative phenomenon, which contradicts the positive and stabilizing role that our partners have been playing so far in South East European economies and societies. The countries of our region have in the last 20 years undertaken numerous structural, political and economic reforms, in view of consolidating the democratic state, the rule of law based on principles of market economy and supported by a consolidated financial system.