SINGAPORE (Reuters) – Singapore’s financial system remains robust and resilient even as the economy suffers its most severe downturn due to the coronavirus pandemic, central bank chief Ravi Menon said on Thursday.
The trade-reliant economy plunged into recession in the second quarter after contracting by a record 41.2%, data showed this week.
There was substantial uncertainty over the global economic outlook, the Monetary Authority of Singapore’s (MAS) managing director told a news conference after the central bank’s annual report was released.
“The economic situation remains dire. The recovery is likely to be slow and uneven, weighed down by renewed outbreaks of infection here or abroad,” he said.
The MAS maintained its GDP forecast in the range of -4% to -7% for 2020, keeping Singapore on track for its biggest slump.
Menon said roughly 12% of Singapore’s economy – including construction and travel-related sectors – was at the “epicentre” of the impact of COVID-19.
The MAS eased monetary policy in March, while the government has pumped in nearly S$100 billion ($72 billion) worth of stimulus and emergency relief measures to blunt the impact of the pandemic.
Menon said the MAS was in active discussions with Singapore banks over their capital management measures, which would include whether or not to restrict dividend payments.
He also said the MAS hoped to make an announcement around October about gradual repayment of relief measures by businesses and individuals. “We want to avoid cliff effects” from a sudden withdrawal of that support.
Singapore has rolled out measures such as deferment of loan repayments and insurance premiums for firms and individuals.
Responding to a question on whether Singapore was seeing asset inflows due to the political uncertainty in Hong Kong, Menon reiterated this was not significant.
“We’ve seen increased flows into Singapore from a variety of sources, and that includes Hong Kong, but the amounts are not large,” he said.
“There are more enquiries, as you would expect when there is greater uncertainty in Hong Kong. Flow of activity of businesses also is not significant,” Menon said.
China imposed a sweeping new security law in Hong Kong this month, adding to worries over the risk of a flight of capital and talent as Beijing tightens its grip on the financial hub.
(Editing by Kim Coghill and Jacqueline Wong)