It is too early to say how events will unfold in the wake of Britain's vote to exit the European Union but uncertainty will weigh on world markets for the next few years at least, Deputy Prime Minister Tharman Shanmugaratnam told Parliament yesterday.
"We can expect repeated bouts of volatility in financial markets as Brexit is debated and negotiated," Mr Tharman said.
"But what is of greater concern are the economic and political uncertainties resulting from Brexit. These uncertainties will weigh on the United Kingdom, Europe and the global economy for at least a few years, and are likely to dampen growth."
In the short term, Brexit will affect the currency and stock markets more than real economies, and its effects so far have "not been a major concern for us", he said.
What happens over the longer term is even less predictable, he added, in response to Mr Lim Biow Chuan (Mountbatten) on how Brexit is affecting the Singapore economy.
Mr Tharman noted Singapore thrives on open global trade, and could face "major implications" if Britain's EU referendum outcome indeed marks a shift towards protectionist policies worldwide.
"A more pessimistic state of affairs cannot be ruled out," he said. "If the UK is unable to hold itself together as a union, or if nationalism gathers pace among the EU's member countries, there will very likely be a permanent weakening of their economies."
Mr Patrick Tay (West Coast GRC) also asked about how Brexit would affect the investments of sovereign wealth fund GIC and state investment firm Temasek Holdings.
Mr Tharman replied that GIC and Temasek are focused on delivering long-term returns, and that the aftermath of the 2008 financial crisis demonstrated their ability to recover from market shocks.
"Their portfolios recovered their value within one to two years, and have continued to grow since then," Mr Tharman said.
Mr Lim also raised concerns that the uncertainty in Britain could send workers looking for employment to Singapore, and asked what would be done to ensure that these foreigners would not adversely affect the employment of citizens in the financial service industry.
Mr Tharman replied: "It's not a framework where everyone who wants to come can move to Singapore."