koh yong guan : review of singapore ’ s economy and financial sector opening remarks by mr koh yong guan, managing director of the monetary authority of singapore, at the press conference releasing the mas ’ s annual report, singapore, 21 july 2004. * * * introduction good morning, ladies and gentlemen. let me first give you a quick overview of current economic conditions. i supporting non - inflationary economic growth as you know, the singapore economy experienced a difficult first half last year. global economic conditions had improved markedly since then, providing support for a rebound in the domestic economy. we have since recorded four consecutive quarters of solid growth. the latest economic data released by mti showed that gdp in second quarter this year grew a robust 9. 1 % on a seasonally adjusted annual rate basis. looking ahead, the prospects for the external economy remain bright. notwithstanding the risks from rising interest rates, higher oil prices and a sharper than expected slowdown in china, the upturn in the global economy is likely to be sustained through the rest of this year and will support the continued expansion in the domestic economy. barring any major shocks, singapore is on track to achieve gdp growth of 5. 5 % to 7. 5 % this year. following an extended period of very low domestic inflation, signs of inflationary pressures have emerged in recent months. the forecast for cpi inflation in 2004 was hence revised upwards to the 1. 5 - 2. 0 % range. the labour market is also expected to strengthen, with the unemployment situation improving for the rest of the year. against this backdrop, mas shifted to a policy of modest and gradual appreciation of the s $ neer in april 2004. this policy stance was assessed to be supportive of economic growth, while ensuring low and stable inflation over the medium term. let me now turn to other aspects of mas ’ work during the past year. ii regulation and supervision first, in the area of regulation and supervision, we issued the “ objectives and principles of financial supervision in singapore ” monograph earlier this year. this will help the financial institutions we regulate and supervise better understand the desired outcomes of our supervision. let me say a few words specifically on risk - based capital. we issued details of changes to the capital adequacy requirements for singapore - incorporated banks in may 2004. we believe the new requirements are prudent but competitive, and more sensitive to the banks ’ actual risk profiles. these changes will give the banks greater flexibility to manage their capital

depth. product range has also increased significantly. structured products now account for more than half of the singapore dollar bond market. the asset securitisation market has also gained traction, recording a fivefold increase since 1999. to further enhance the attractiveness of asian capital markets, mas has, over the past year, worked with various governments in the region to encourage investor demand, and to address market access and market infrastructure issues. the asian bond fund or abf is one such initiative. after the successful launch of abf 1, the executives ’ meeting of east asia - pacific central bankers or emeap is making good progress on abf2 to invest in local currency - denominated asian bonds. the emeap group believes that abf2 will promote the development of index bond funds in the regional markets. we are also working with our asean counterpart on an investors seminar to take place later in the year to raise global awareness of our capital markets. the treasury industry continued to grow robustly. foreign exchange and credit trading activities were underpinned by market volatility and a slew of bond issuance in asia. to support the broad - based growth in the financial services sector, much attention was placed over the past year on manpower and skills development. the financial sector manpower conversion scheme, launched recently, will contribute to ensuring a ready supply of skilled manpower in relevant growth areas. v playing a more active role in the international arena over the last year, we have continued our active role in regional cooperation, formulation of international regulatory standards, and active dialogue with our regional and international counterparts. this reflects our recognition of the importance of closer cooperation in a highly interconnected global market. these efforts are also in keeping with singapore ’ s role as an international financial centre. we work closely with our asean counterparts to speed up financial sector liberalisation in the region. beyond asean, we are actively involved in emeap. last week, we successfully hosted the emeap governors ’ meeting as well as the first emeap - eurosystem high - level seminar. in the international regulatory front, we recently assumed the chair of the asia pacific regional committee ( aprc ) of the international organisation of securities commissions ( iosco ), and sit on the iosco executive committee. we have also assumed the chair of the emeap working group on banking supervision, which will facilitate the region ’ s discussion on implementation of basle ii. we are committed to regional and international co - operative efforts