Trade wars will be 'disastrous' for global economy: MAS chief

RESILIENT ECONOMY: The strong showing in the last quarter of 2016 indicates that the Singapore economy retains the capacity to ride on cyclical upswings in demand for exports. - MR RAVI MENON, MAS managing director.
RESILIENT ECONOMY: The strong showing in the last quarter of 2016 indicates that the Singapore economy retains the capacity to ride on cyclical upswings in demand for exports. - MR RAVI MENON, MAS managing director.

US protectionist measures, if in play, could well attract retaliatory measures: MAS chief

The global economy will face "disastrous consequences" if protectionist measures in the United States come into play and prompt trade wars, said Monetary Authority of Singapore (MAS) managing director Ravi Menon.

Such anti-trade policies have been proposed by US President- elect Donald Trump, and include rejecting the Trans-Pacific Partnership deal, imposing extra taxes on US importers and labelling key trade partners as currency manipulators.

"Some of these actions may well attract retaliatory measures, leading to trade conflicts with disastrous consequences for the global economy," Mr Menon told a forum yesterday.

Imposing trade tariffs on China, for instance, "must mean downstream effects cascading through the rest of Asia", given the region's trade links with the world's second-largest economy.

But he added that in all likelihood, "there remains considerable uncertainty as to the actual policy changes in store". Support for free trade remains strong within various arms of the US establishment.

Broadly speaking, global growth will be slightly higher this year compared with last year, said Mr Menon. Recent improvements in business and consumer sentiment may translate into higher investment and consumption.

The Singapore economy is expected to continue its modest pace of expansion this year, with gross domestic product growth likely to be between 1 per cent and 3 per cent, he noted.

Modern services - including finance, business and information and communications technology - will be supported by continued growth in the region and Singapore's growing status as a hub, while trade-oriented industries should also benefit from the mild upturn in global and regional electronics.

"In fact, the strong showing in the last quarter of 2016 indicates that the Singapore economy retains the capacity to ride on cyclical upswings in demand for exports," added Mr Menon, who was speaking at the UBS Wealth Insights forum at the Marina Bay Sands Convention Centre.

Singapore's exports in November last year jumped 11.5 per cent over the same period a year earlier, helped by a rise in shipments to the European Union and China.

Mr Menon noted that Singapore "will not be immune to the global tightening of financial conditions, volatility in capital flows and potential stresses in the regional corporate sector".

"Economic restructuring remains a work in progress, and we need to do more to raise productivity growth," he said.

"But our macro fundamentals are sound, and we will weather these storms. And as we continue to invest in the future - in skills, in technology and in infrastructure - we will emerge a stronger and more dynamic economy."

A key challenge, he noted, will be how well and how quickly the country can upskill as a workforce to thrive in an increasingly digitalised economy.

"Raising the levels of skills, competencies and abilities is going to be absolutely critical," he said, pointing to the need to keep up with new technologies and disruption.

A version of this article appeared in the print edition of The Straits Times on January 17, 2017, with the headline 'Trade wars will be 'disastrous' for global economy'. Print Edition | Subscribe