Britain will need to negotiate new agreements with its trading partners, including Singapore, as it will no longer be covered by existing European Union trade agreements, after Britain's shock vote to exit the world's largest trading bloc.
Responding to queries from The Straits Times, the Ministry of Trade and Industry (MTI) said the full impact of Brexit will depend heavily on Britain's pending trade arrangements with the EU and other markets, including Singapore.
Britain's relationship with the EU and its antecedents goes back some 40 years.
"With Brexit, the United Kingdom is no longer covered by the existing trade agreements that the EU has, and will need to negotiate new agreements with its trading partners, including Singapore," an MTI spokesman said.
The nature and precise timing will depend on when Brexit takes effect, following Britain's deliberations with the EU, MTI said.
While Brexit has led to substantial uncertainty and volatility in financial markets, MTI said it is too early to assess the full consequences.
"However, based on analysts' current estimates of the impact of Brexit on the UK and the euro zone economies, MTI's assessment is that the medium- to long-term direct impact of Brexit on the Singapore economy is likely to be modest. "We will continue to monitor the situation and assess the economic consequences of Brexit on the Singapore economy and our businesses," it said.
Meanwhile, the Monetary Authority of Singapore (MAS) said yesterday that Singapore's interbank money markets have continued to function in an orderly manner, and its banking system remains sound.
MAS noted that liquidity positions of the major banks in Singapore are healthy, and the overall banking system's liquidity remains adequate. The central bank said it will provide additional liquidity to the banking system if needed.
GIC deputy president and group chief investment officer Lim Chow Kiat said the Singapore sovereign wealth fund "runs a long-term and diversified portfolio and is prepared for a period of heightened market uncertainty".
"What's most important to us is that markets remain open," he said.
Calling Brexit an "unprecedented event that could continue to trigger significant market volatility," bourse operator Singapore Exchange said it remains "vigilant in monitoring the market and is prepared to make swift adjustments when appropriate", as part of its risk management measures.
The MAS said the trade-weighted Singapore dollar remains within its policy band, despite heightened volatility in global forex markets, and that it stands ready to curb excessive volatility in the Singdollar.
"We have been prepared for the market volatility. MAS had been in close contact over the past weeks with banks in Singapore, foreign central banks and regulators to take preparatory actions to ensure the resilience of our financial system and markets in the event of Brexit," MAS said.
The central bank said it will continue to be vigilant and stay in close contact with fellow central banks and regulators.