We experienced four consecutive quarters of sequential contraction with a cumulative output loss of 9% – our deepest recession since independence. Conversely, with the subsequent recovery in the global economy, Singapore’s GDP rose sharply and now exceeds the level before the crisis. Last year, the economy grew by an estimated 14.7%. 4. Over the course of the crisis in 2008/2009, MAS’ monetary policy responses were deliberately graduated, underpinned by the objective of promoting price stability in the medium term. We did not react to every single development in the economy or the financial markets as this would have introduced unnecessary volatility and uncertainty. Following the significant deterioration in external demand in late 2008, MAS eased policy in October 2008 and April 2009 to provide support to the domestic economy. In early 2010, taking into account the strong recovery path of the economy and rising domestic cost pressures amidst high rates of resource utilisation, MAS shifted to a modest and gradual appreciation of the $ policy band. Subsequently, MAS tightened policy further in October 2010 by increasing slightly the slope of the policy band. 5. Singapore’s financial system experienced some initial strains but otherwise has proven resilient during the crisis. Banks and insurers maintained robust capital and liquidity buffers, and balance sheets were relatively strong. Their prudent risk management allowed them to weather the crisis well. MAS has also remained vigilant through the crisis, with my colleagues working hard to ensure that our regulatory and supervisory efforts remain robust. Challenges ahead 6.

However, in more recent weeks, the more positive data in the US has resulted in some flow-back to the US markets. This more variegated and dynamic landscape means financial markets are likely to remain volatile in the months ahead. We need to be prepared to manage this volatility. 9. Second, policymakers not only have to grapple with the aftermath of the financial crisis, but also the medium term structural challenges facing their countries. There are significant differences in the pattern of saving and investment across economies. Many of these reflect structural factors such as demographics, as well as the particular path of growth and development. To sustain global growth, some changes in the global saving-investment pattern will be necessary. This cannot happen overnight. Instead, we need sustained and coordinated policy action across all the major economies. The IMF and global bodies like the G20 will have to continue to focus and provide direction on these structural issues. 10. Third, the financial crisis shows how critical the nexus is between the health of the financial system and the health of the economy. Global regulatory reforms are necessary to address many of the weaknesses uncovered during the crisis. Yet, we have to tread a fine balance to build not just have a resilient global financial system, but also one that can support sustainable economic growth. Given the varying pace of economic recovery and the different phases of economic transition, regulations need to be appropriate to local circumstances, while preventing regulatory arbitrage.