• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Global Financial Crisis - Impact on Singapore and Policy Measures Taken to counter it
 

Global Financial Crisis - Impact on Singapore and Policy Measures Taken to counter it

on

  • 6,065 views

 

Statistics

Views

Total Views
6,065
Views on SlideShare
6,065
Embed Views
0

Actions

Likes
0
Downloads
102
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Global Financial Crisis - Impact on Singapore and Policy Measures Taken to counter it Global Financial Crisis - Impact on Singapore and Policy Measures Taken to counter it Presentation Transcript

    • Global Financial Crisis Impact on Singapore andPolicy Measures Taken to Counter It Policy Brief – Presentation 17th November, 2012 Vikas Sharma, PMP® 1
    • Section Policy Brief – Presentation1 Global Financial Crisis GDP Growth Rates (YoY) Stock Market (month-end) US$ Appreciation against local Countries Q3-2008 Q4-2008 Q1-2009 Q2-2009 June-08 March-09 Change (%) June-08 March-09 Change (%) US 0.7% -0.8% -3.3% -3.8% 11,350 7,608 -33.0% - - - Eurozone 0.6% -1.4% -4.9% -4.8% 3,315 2,036 -38.6% 1.57 1.32 -15.9% Japan -0.2% -4.3% -8.7% -7.2% 13,481 8,109 -39.8% 106.21 98.96 -6.8% Korea 3.1% -3.4% -4.2% -2.2% 1,674 1,206 -28.0% 1,046.05 1,383.10 32.2% Hong Kong 1.7% -2.5% -7.8% -3.8% 22,102 13,576 -38.6% 7.79 7.75 -0.5% Thailand 3.9% -4.3% -7.1% -4.9% 768 431 -43.9% 33.44 35.50 6.2% Malaysia 4.7% 0.1% -6.2% -3.9% 1,186 872 -26.5% 3.26 3.64 11.7% Philippines 5.0% 4.5% 0.6% 1.5% 2,459 1,986 -19.2% 44.95 48.32 7.5% Taiwan -1.0% -8.4% -10.1% -7.5% 7,523 5,210 -30.7% 30.35 33.91 11.7% Singapore 0.0% -4.3% -9.5% -3.5% 2,947 1,699 -42.3% 1.35 1.52 12.6% Indonesia 6.4% 5.2% 4.4% 4.0% 2,349 1,434 -39.0% 9,228.00 11,700.00 26.8% Different from previous crises in that it Had its genesis in imbalances that had started at the ‘core’ of the world been building up and needed unwinding economy and spread to the periphery, – 1. Current accounts instead of the other way round 2. Risk premiums in the financial sector Triggered in the financial sector but A truly ‘global’ crisis that caused a fallout pervaded to the real economy – ‘synchronized’ economic downturn. drop in global trade, industrial Decoupling theory laid to waste as both production, high unemployment, equity advanced and developing economies hit market corrections Vikas Sharma, PMP® 2
    • Section Policy Brief – Presentation 2 Impact on Singapore 1 Banking & Financial Sector2 3 Foreign Direct Trade Impact on Investment Singapore 4 5 Real Economy Labor Market Vikas Sharma, PMP® 3
    • Section Policy Brief – Presentation 2 Impact on Singapore 1 Banking & Financial Sector 2 3 Foreign Direct Trade Impact on Investment Singapore 4 5 Real Economy Labor Market 1 Banking & Financial Sector Local banks had minimal exposure to toxic assets linked to US home mortgages or distressed financial institutions Isolated cases of toxic structured notes sold by local banks caused much public protest and embarrassment for banks/regulators Immediate impact was on share prices of local banks as eroded customer confidence made them plummet by more than 50% As crisis unfolded, NPLs rose (to 2.5% in Q2 09); overall lending contracted (16% drop from Oct 08 – Sep 09; risk-aversion increased; SME borrowers turned away Vikas Sharma, PMP® 4
    • Section Policy Brief – Presentation 2 Impact on Singapore 1 Banking & Financial Sector 2 3 Foreign Direct Trade Impact on Investment Singapore 4 5 Real Economy Labor Market 2 Trade In the run up to the GFC, Net Exports were driving Imports/ExportsSingapore’s GDP growth: over 1990-2007, other GDP 30.00% components stayed stable or declined 20.00% 10.00% Starting Q407, Net Exports plunged as imports decreased at a slower rate than exports 0.00% Net Exports -10.00% Direct exports to G3 fell as demand there slowed. Exports -20.00% This further caused decline in intermediate exports Importsthat formed bulk of SG’s trade with regional markets -30.00% -40.00% Appreciation of S$ against other Asian countries -50.00%meant that local exporters (esp. Electronics) found itmore difficult to compete with regional competitors -60.00% Vikas Sharma, PMP® 5
    • Section Policy Brief – Presentation 2 Impact on Singapore 1 Banking & Financial Sector 2 3 Foreign Direct Trade Impact on Investment Singapore 4 5 Real Economy Labor Market 3 Foreign Direct Investment (FDI) FDI forms a disproportionately high part of Singapore’s gross capital formation (60% in 2007 vis-à-vis <10% for other Asian countries) As export revenues plummeted and profit margins contracted, foreign investment in local export-manufacturing industries fell too; From S$7.8 billion to just S$0.7 billion over Q1-Q3 2008 Vikas Sharma, PMP® 6
    • Section Policy Brief – Presentation 2 Impact on Singapore 1 Banking & Financial Sector 2 3 Foreign Direct Trade Impact on Investment Singapore 4 5 Real Economy Labor Market 4 Real Economy The GFC permeated into the real economy via transmission channels of trade and financing – manifested in a 32% for Singapore’s IPI (Mar08-Mar09) and worsening of General Biz. Expectations (+25 in Q307 to -57 in Q408) Export-heavy manufacturing sectors such as Electronics and Chemical/Chemical Products were the worst hit In the Services sector, Singapore’s linkages to the global economy via industries like Transportation, Logistics, Tourism etc. also contributed to the slowdown of economic activities locally Singapore’s flourishing tourism industry was hard hit with both number of arrivals as well as spending/arrival going south. Receipts grew by 4.8% in 2008, compared to 14% in 2007 Vikas Sharma, PMP® 7
    • Section Policy Brief – Presentation 2 Impact on Singapore 1 Banking & Financial Sector 2 3 Foreign Direct Trade Impact on Investment Singapore 4 5 Real Economy Labor Market 5 Labor Market Towards the end of 2008, lowered economic activity and business sentiments led to hiring freezes, wage pressures & redundancies Job creation fell by 50% between Q3-08 and Q4-08; Redundancies rose almost 6-folds from Q2-08, peaking in Q1-09. Manufacturing worst hit (70%) However, unemployment rate not as bad as in the previous recessions. Peaked at 3.4% in Sep 09, around half of the 6.2% peak in Sep 03 Resilience could be attributed to fiscal measures and to continued demand from Construction (MBFC, IRs, Downtown MRT Line) and Services (retail, F&B, hotels etc. sprouting up in the IRs) Vikas Sharma, PMP® 8
    • Section Policy Brief – Presentation 3 Singapore’s Policy Responses to the GFC Banking & Financial Sector Measures Singapore’s Response Monetary Fiscal Policy Policy Measures Measures Vikas Sharma, PMP® 9
    • Section Policy Brief – Presentation 3 Singapore’s Policy Responses to the GFC Banking & Financial Sector Measures MAS announced blanket guarantee on deposits of individuals and non- bank customers in financial institutions holding MAS licenses (backed by S$200 billion of Singapore Government reserves MAS became one of 13 central banks globally to open a US$30 billion swap facility with the Federal Reserve in order to ensure availability of liquid funds for financial institutions MAS cracked down hard on banks involved in distribution of structured notes linked to toxic assets/institutions. Imposed bans on sale of any structured notes by 10 financial institutions locally for 6-24 months; published consumer guides on understanding such products Vikas Sharma, PMP® 10
    • Section Policy Brief – Presentation 3 Singapore’s Policy Responses to the GFC Monetary Policy Measures MAS had been following a policy (for 4 years) of gradual appreciation of the S$ NEER (net effective exchange rate) going into the GFC to control inflation/encourage exporters to be move into higher value-add goods As the crisis broke out, MAS responded by abandoning the appreciating S$ stance and shifting to zero-appreciation in Oct 08. As crisis deepened, MAS maintained zero-appreciation but re-centered the policy band for S$ NEER lower in Apr 09, in a way, allowing the S$ to depreciate a little Interesting to note that policy stance was UNLIKE during AFC and SARS crisis (when S$ was allowed to depreciate significantly). Instead, MAS declared its firm confidence in Singapore’s economic fundamentals and only shifted to a neutral/slightly depreciating stance Vikas Sharma, PMP® 11
    • Section Policy Brief – Presentation 3 Singapore’s Policy Responses to the GFC Fiscal Policy MeasuresDeficit of S$8.7 billion incurred in FY09 (3.5% of GDP) Resilience Package (S$20.5 billion) Preserving Jobs Credit Scheme; Skills Programme for Upgrading S$5.1 billion Jobs & Resilience; Enhanced Workfare Supp. Scheme Stimulating Special Risk-Sharing Initiative (SRI): S$5.8 billion Bank Lending 1) Bridging Loan Programme 2) Trade Financing Enhancing Biz Corporate Tax Rate reduced further to 17%; S$2.6 billion Cashflow 40% property tax rebate for commercial assets Supporting Personal Income Tax rebate; Doubled GST credits; S$2.6 billion Households Increased allowances/topups; 40% property tax cut Infrastructure Brought forward several projects: HDB lift-upgrading, S$4.4 billion Improvements schools, sewage projects, military facilities etc. Vikas Sharma, PMP® 12
    • Section Policy Brief – Presentation 4 Assessment of Singapore’s Policy Response Unlike several other countries in the region, Singapore did not depreciate it’s currency and risk inflation in a bid to stem the economic downturn Singapore’s strong macroeconomic fundamentals allowed it ‘breathing space’ with its crisis response. Policymakers were able to take strong measures to stem short- term turbulence without eroding stakeholder confidence in long-term prospects Singapore’s sometimes-maligned ‘big brother’ governance approach actually worked to its advantage when responding to the crisis as various agencies were able to leverage on their close cooperation and well-maintained databases to implement measures swiftly Policymakers shied away from ‘knee-jerk’ generic responses and instead crafted well thought out, customized policy responses Vikas Sharma, PMP® 13
    • Thanks for your time Vikas Sharma, PMP® +65-914446844 Vikas Sharma, PMP® 14