Singapore's Central Bank Chief Sees Sustainable Growth at 2-4%

Ravi Menon Photographer: Wei Leng Tay/Bloomberg

Singapore’s economic recovery is broadening out in the city state, but there are still “real challenges” in the labor market, central bank Managing Director Ravi Menon said.

Sustainable economic growth is estimated at 2 percent to 4 percent, Menon told delegates at the UBS Wealth Insights Conference Monday in Singapore. Manufacturing is resilient and financial services are “doing well,” he said.

The challenge on the labor supply side is whether Singapore can raise productivity given that its workforce is already well-educated and skilled, Menon said.

Earlier in a speech, Menon outlined risks to the global economy, using the analogy of the fable ‘Goldilocks and the Three Bears’ to warn of possible risks. While he was optimistic about the outlook, with even a slowdown in China in 2018 not sharp enough to wreck the gains, he said “three grumpy bears” threaten to derail the positive momentum: inflation, trade protectionism and financial instability.

A prolonged period of benign inflation has given global policy makers breathing room to tighten monetary policy only gradually, but it also could mean a dangerous misread of unemployment conditions.

“The disinflationary effects of globalization, for instance, may not persist for much longer,” he said. The return of inflation, which is most likely to be led by the U.S., will probably prompt faster tightening by central banks. That would prove challenging as “monetary policy tightening has always been a tricky business fraught with risk” that can curb household and corporate spending when not done gently.

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