Heng Swee Keat: A review of Singapore’s economy and financial system Opening remarks by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at MAS' Annual Report 2008/09 Press Conference, Singapore, 16 July 2009. *  *  *  Backdrop on global financial and economic crisis The world economy has witnessed one of the most tumultuous and challenging times. Global GDP is expected to contract in 2009, the first time in the post-War period. 1 The tremors that shook the financial markets surpassed the most extreme stress scenarios. Bank losses have now exceeded $ trillion and further writedowns are expected. In the six months following the collapse of Lehman Brothers, from September 2008 to March 2009, stock markets worldwide fell by almost 40%, wiping off about $ trillion in capitalisation. Singapore’s Straits Times Index (STI) also fell by close to 35%. In the fixed income markets, the rally in government bonds was offset by the sell-off in the non-sovereign sectors such that global bond markets in aggregate also declined over this period. Many institutional and individual investors were affected negatively. These shocks to the international financial system severely disrupted credit flows and led to dislocations in economic activity globally. The US – which was the epicenter of the crisis – as well as the EU and Japan, fell into a deep recession. The collapse in G3 demand, in turn, had a cascading effect on the emerging economies.
In response to announcements by jurisdictions in the region of blanket government guarantee on deposits, the Singapore Government announced on 16 October 2008 a guarantee on deposits of individuals and non-bank customers of banks licensed in Singapore. This was aimed at ensuring a level international playing field for banks in Singapore and demonstrated the Government’s confidence in the soundness of the financial system. It has also had the effect of maintaining the confidence of investors and depositors in our banking system. State of the financial System The measures taken around the three pillars of maintaining sound financial institutions, ensuring well functioning markets and maintaining confidence of investors, as well as the way in which institutions and market players responded to the crisis, have helped our financial sector weather the crisis. A healthy and functioning financial system has continued to support credit and capital intermediation to the economy. Compared to the Asian Financial Crisis, the moderation in bank lending has been milder. While credit conditions have tightened, there has not been disruption of credit flows to corporates. A total of $ billion 2 was raised by SGX listed companies in the first half of 2009, which accounted for 65% of  2  2  Source: SGX & Thomson Reuters. BIS Review 91/2009  total rights offerings in Asia in this period. More than 7,300 Government-backed loans amounting to $ billion have since been approved in the first half of 2009.