ravi menon : emerging asia – restructuring for sustained growth remarks by mr ravi menon, managing director of the monetary authority of singapore, at jp morgan singapore ’ s 50th anniversary dinner, singapore, 31 october 2014. * * * mr jamie dimon, chairman & ceo, jp morgan chase & co distinguished guests, ladies and gentlemen i am delighted to join you this evening to mark jp morgan ’ s 50 years in singapore. during these last 50 years, jpm singapore has grown to become an important node in the bank ’ s global network. it is the asia hub for commodities and treasury services. it is the hub for fx and private banking in south and southeast asia. jpm singapore entities together employ about 2, 800 people. this is projected to increase to 3, 500 over the next few years. jpm has had an even longer presence in asia – close to a century. jpm has thus had a front row seat witnessing asia ’ s remarkable transformation and shift in the global economic centre of gravity to the region. and it is now positioned to participate in the next exciting chapter of the asian growth story. as we approach 2015, the economies of emerging asia are at an inflection point. externally, they have to deal with the normalisation of monetary policy and interest rates in the united states. domestically, they have to sustain growth and macro stability amidst ongoing structural reforms. the underlying long - term growth dynamics in emerging asia are good. the demographics are favourable, with the proportion of the working age population continuing to rise in most asian economies. the emergence of a sizeable middle class and ongoing urbanisation will underpin a continued expansion in domestic consumption and investment. these underlying factors alone should support healthy growth in emerging asia, barring serious policy mis - steps or crises. but if emerging asia also undertakes the necessary structural reforms and achieves greater regional integration, growth could be even higher. for example, successful reforms and further integration could boost asean ’ s growth from close to 5 % currently to 6 %. structural reforms will help unlock the productivity gains that asia needs for its next phase of growth. this will be increasingly important as countries move up the economic value chain. the structural reforms each economy needs are different. but what is encouraging is that these countries have moved economic restructuring to the top of their agenda. in china, the goal is to orientate the economy towards domestic consumption and strengthen the role of the market in allocating resources. the third plenum reforms offer a comprehensive blue

to help keep interest rates low. a number of factors have contributed to the unusually low long - term interest rates that we have seen, but one of them has been the changing attitude of savers toward risk. 2 economic growth has been relatively steady at a moderate pace, and inflation, although higher, is expected to remain fairly low. as people have become increasingly confident that good economic performance will last for a while, they have asked for less extra compensation for taking the risks of lending for longer periods and to borrowers whose odds on default are usually viewed as high. these changing attitudes have helped produce an unusual phenomenon - the failure of longer - term interest rates to move higher in an expanding economy with rising short - term interest rates ; for many businesses, longer - term borrowing costs have actually fallen since last summer. in this environment, the economy is likely to remain on a path of solid growth, strong enough to continue to gradually reduce unemployment and raise operating rates in industry for a while. perhaps the logical question, given my description of favorable changes in confidence and financial conditions, is why " gradually " and only " for a while " - why not a much more rapid rate of expansion that will raise employment and production more quickly than we have experienced so far this expansion? the answer is that several forces seem to be leaning the other way, and will tend to restrain spending growth going forward. over the near - term, increases in energy prices are siphoning purchasing power of both households and businesses to suppliers overseas, leaving less for non - energy goods and services produced here at home. how large that effect will be is hard to predict. the rise in energy prices last year seems to have damped spending to a limited extent. but the persistence of higher prices may have a cumulating effect on spending, early hints of which might now be showing up in the latest reading on retail sales. in the housing market, prices are unlikely to fall on a national basis, but the increases well above the rise in rents and incomes that we have seen in recent years cannot continue indefinitely, and rising interest rates will probably damp these increases even more. home building should cool a bit as a result, but perhaps more consequentially, as capital gains on housing slow, households will likely turn to reducing the growth of their consumption out of current income as a way of building assets to finance their children's education, their retirement, and so forth. finally, economic policy is becoming less expansionary. after the