Transcript The Global Financial Crisis – Implications for Asia Dr Tony Tan Keng

The Global Financial Crisis – Implications for
Asia
Dr Tony Tan Keng Yam
Deputy Chairman & Executive Director, GIC
6 August 2009
Increasing signs of stabilization and recovery
Three Post Crisis Trends: Deleveraging
Recessions with Financial Crises Take
Longer to Normalize
Source: IMF
Three Post Crisis Trends: Deflation…
Source: IMF
…Then Inflation
•
Pressure to go slow when
withdrawing fiscal and monetary
policy
•
Deteriorating fiscal positions could
put central banks under pressure
•
Global labour supply will start to be
less salutary
•
Pressure from natural resources
given EM demand
•
Aging populations, uncertain
productivity gains
Source: IMF
Three Post Crisis Trends: Shift to EM
Source: GIC
Asia has benefited from trade
Source: CEIC, GS Global ECS Research
Asia has strong fundamentals and savings
Source: CEIC
Asia’s banks are not leveraged
Source: Nomura Research
Easy Liquidity Poses Risks to Asian
Policymakers
US Interest Rates, Asian Currencies and Equities
2007 - current
6.0%
160
140
5.0%
120
4.0%
100
3.0%
80
60
2.0%
40
1.0%
20
0.0%
31/01/2007
Source: Datastream
0
31/01/2008
31/01/2009
Fed Funds Target (%)
Asia Weighted Dollar Exchange Rate (1988=100, coeff variation, 24mth rolling)
MSCI EM Asia relative to MSCI World (Jan 07 = 100, rhs)
Risks and Challenges
• Further weakening of
the US economy
• Weak US consumption
fundamentals
• Increased protectionism
Is trade good for your country?