GIC Says Risk of Shocks May Trigger World Recession `Sooner
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GIC Says Risk of Shocks May Trigger World Recession `Sooner Than Expected'
Bloomberg.com, 23 Jul 2010
By - Jul 23, 2010
The global rebound is “fragile” and shocks could push the world toward another recession, according to Government of Singapore Investment Corp., manager of more than $100 billion of the nation’s foreign reserves.
Risks to the global recovery have increased due to Europe’s debt turmoil, continued deleveraging in the U.S. and protectionist pressures, Tony Tan, deputy chairman of GIC, said in a speech in Singapore today. The fund is ranked the world’s sixth-largest state investment company by Sovereign Wealth Fund Institute in California.
“The economic recovery, while real, is fragile and there is a risk that negative shocks could push the global economy towards a recession sooner than expected,” Tan said. “The strong rebound in global industrial production is peaking while monetary and fiscal policies, particularly in the larger emerging economies, are being normalized.”
Policy makers in most developed economies have refrained from raising interest rates from record lows amid concern the global recovery will falter. The International Monetary Fund this month said financial-market turmoil has increased the risks to the rebound, and Moody’s Investors Service lowered its credit ratings on Portugal and Ireland.
Bernanke’s Comments
“The challenge for policy makers in many developed economies will be to convince markets that they have credible plans to ensure sustainable public finances over the medium to long term, while minimizing the negative short-term impact on growth,” Tan said. “While markets have focused on Greece, Portugal, Spain, Ireland and Italy, this risk remains high for the U.K., U.S., and Japan.”
U.S. Federal Reserve Chairman Ben S. Bernanke said July 21 the economic outlook remains “unusually uncertain,” adding to concern the global recovery is losing steam. The comments sent crude oil and metal prices lower and triggered declines in stocks in the U.S. and Asia.
Developed economies will take a “long time” to recover fully from the global crisis and emerging nations such as Brazil, Russia, India and China will gain importance, Tan said.
The world economy may grow 4 percent in 2010, before expanding at a more moderate pace next year, he said. Growth in Asia excluding Japan may reach 8 percent this year, with China and India expanding 8 percent to 10 percent, Tan estimated.
Emerging Markets
“For investors, the rise of emerging markets will mean that a larger proportion of their investments will be in these markets,” he said. “Far from being a risky and perhaps optional part of their portfolios, emerging markets will become a core and unavoidable asset class in global portfolios.”
GIC’s investments in stocks accounted for 38 percent of its portfolio in the year to March 31, 2009, while bond investments represented 24 percent, according to its annual report released in September. Allocations to alternative investments, including private equity, real estate and hedge funds, made up 30 percent of its portfolio.
GIC bought stakes in Citigroup Inc. and UBS AG in 2008 as the collapse in the U.S. subprime mortgage market in 2007 froze credit markets and led to almost $1.8 trillion in losses and writedowns at financial institutions worldwide.
The global financial crisis of 2008 and 2009 will likely “accelerate the shift in economic power from the developed to the emerging world,” Tan said. “Asia is at the cusp of the next stage in its development.”
Domestic demand will be a key source of Asia’s economic growth, which has been largely dependent on exports, and “extensive” infrastructure investment will be needed as cities develop, Tan said. Higher wages and investment inflows will over time result in “significantly stronger currencies” in the region, he said.
The need for capital to finance Asia’s growth will also fuel the growth of the region’s foreign-exchange, bond and equity markets as well as its financial institutions, he said. Asia, led by China, will also increase research and development of technologies that address environmental constraints such as renewable technology, he said.
To contact the reporter on this story: Shamim Adam in Singapore at [email protected]
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more excuses?
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how come somebody still had the cheek to mention our economy is strong and growing some more
how come
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old man doing forecast to take cover.
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who dare to q the old man
unless, you want to be in exile
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yeah.. he would probably take away your citizenship even though you had stayed here all your life...
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Guess which country is on notice of debt default.............is another European country....it is moving east.
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after hundreds of years of debt and compounded interest...........Capitalism is reaching it's end..........
EVERY major Western country is in deep debt................even Japan..........while China and India are dependent on the West................
eventually the banking system will fail when the next market crash comes.......
there's no recovery but just asset bubbles built up again by even more lending.........
as long as US and Europe has more and more unemployment............more and more banks are closing every week...........what recovery are they talking about ???
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Today there was a page by a political correspondent saying more people vote for the PAP during bad times.. LOL... Maybe they are changing strategy liao... wait for economy to be bad.. LOL...
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Originally posted by Junyang700:
Today there was a page by a political correspondent saying more people vote for the PAP during bad times.. LOL... Maybe they are changing strategy liao... wait for economy to be bad.. LOL...
how bad can it goes?
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they might as well say more people vote for PAP when there's flash floods !
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Originally posted by Junyang700:
Today there was a page by a political correspondent saying more people vote for the PAP during bad times.. LOL... Maybe they are changing strategy liao... wait for economy to be bad.. LOL...
Only fools will believe in PAP state propaganda media.
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if only those stock traders and government stop being "Blind" and simply let it crash.....so that we can all reset the Debt back to --- Zero.
Thats the whole idea....isn't it.
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not so simple brudder.............people say i'm crazy when i tell them many major countries are controlled by the bankers..........
if these countries are really ''soverign''.............why aren't they printing their own money instead of borrowing from the PRIVATE central banks and then paying interest on these debts that are created out of thin air by the banks in the 1st place ???!!!
the Federal Reserve is the biggest scam of all time.............US will eventually default becoz for many years, they can't even pay the annual interest on the original loans..........and every year, they borrow more..........
the annual interest alone is over 400 or 500 billion...........
eventually the US will have to hand over state properties to the Federal Reserve just like the bank take over your house when you can't pay the house loan.
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Jul 24, 2010 - Straits Times
Asia recovering well: GIC
By Gabriel Chen
ASIA is recovering well from the financial crisis but there are still risks to the world economy, including the turmoil in Europe and protectionist pressures in many countries, according to Dr Tony Tan, deputy chairman of the Government of Singapore Investment Corporation (GIC).
Dr Tan told the Swiss Re Forum Singapore on Friday that the global recovery is likely to continue into the next year but at a more moderate pace.
But he cautioned that the rebound is 'fragile' and 'negative shocks could push the global economy towards a recession sooner than expected'.
And while growth prospects are much better for Asia than for the developed world, Dr Tan does not see Asia 'aggressively challenging' the global order, which has benefited the region for decades.
'Asian countries, including China, generally share the view that a multilateral, rules-based international order is critical to their long-term growth and development,' said Dr Tan. 'Asia's rise therefore is not inevitably a zero-sum geopolitical game where the US and Europe must decline as Asian countries grow.'
Dr Tan flagged the turmoil in Europe, saying that growth there should be weaker at around 1 per cent.