Global economic risks may have risen but there is no need to overreact just yet, said Singapore's central bank chief Ravi Menon.
"Dark clouds are an appropriate phrase but it's not raining yet," Mr Menon, managing director at the Monetary Authority of Singapore (MAS), said in an interview on Bloomberg Television on Tuesday.
"I don't want to paint too glossy a picture on it but I don't think we should overreact," he added.
He struck a relatively upbeat outlook for the world economy, cutting through the gloom that has followed escalating trade tensions between the United States and China - which are among Singapore's largest trading partners - and a global emerging-market rout.
The International Monetary Fund (IMF) on Tuesday cut its global growth forecast for the first time in more than two years, while early indicators already show a possible slide in manufacturing.
The MAS chief said he is taking a balanced view, pointing to still solid growth in Asia, despite an expected slowdown in China, and a US economy that is "chugging along".
RESILIENT GLOBAL ECONOMY
We are not seeing any major collapses in growth in any part of the world. What is interesting, I think, is the underlying resilience of the global economy.
MONETARY AUTHORITY OF SINGAPORE MANAGING DIRECTOR RAVI MENON
The bigger casualty may well not be trade but investment. If corporates start feeling uneasy or uncertain about their future, they may well not make investments and that may well have a much stronger impact.
MR MENON, who says a major worry is a possible slump in investment.
"We are not seeing any major collapses in growth in any part of the world," said Mr Menon. "What is interesting, I think, is the underlying resilience of the global economy."
The bulk of trade disputes that dominated the news last year have also largely subsided, with the exception of the conflict between the US and China, he added.
A prolonged US-China trade war and a sharper downturn in the world economy have serious implications for export-reliant Singapore. The city state's exports amount to 173 per cent of gross domestic product, and a rebound in trade last year helped spur economic growth to 3.6 per cent. Growth is forecast at 2.5 per cent to 3.5 per cent this year.
The solid growth outlook enabled the MAS to tighten monetary policy in April, as other global central banks also began doing the same.
Mr Menon declined to comment on the central bank's policy decision due tomorrow, but just over half of the 21 economists in a Bloomberg survey predict that the MAS will tighten monetary policy again.
Global trade risks are set to dominate talks as the world's financial elite gather on the Indonesian island of Bali this week for the IMF-World Bank's annual meeting.
Mr Menon's sanguine outlook does not mean that everything is "hunky-dory". He said a major worry is a possible slump in investment if global sentiment takes a knock.
"The bigger casualty may well not be trade but investment," said Mr Menon. "If corporates start feeling uneasy or uncertain about their future, they may well not make investments and that may well have a much stronger impact."
Trade and Industry Minister Chan Chun Sing last week cautioned that the confidence in the global economy could suffer if there is a protracted trade war.
Adding to that, the IMF said further inflaming of the conflict between the US and countries including China would accelerate capital flight from emerging markets.
Asia's emerging economies are in better shape, with sound fundamentals and policy responses making them well placed to avoid the financial crisis that struck the region two decades ago, Mr Menon said. "Emerging Asia should ride through this period of volatility.