Reflecting the strength of the US dollar, the Sing dollar, along with most other major currencies, depreciated against the US dollar in the first half of this year. However, the Sing dollar appreciated against the euro, the Australian dollar, pound sterling and some of the regional currencies over the same period. The external environment has since strengthened. The industrial countries except Japan are enjoying strong economic growth. The regional economies have shown more vigour and resilience than was expected. Against these positive developments, Singapore’s GDP rose by 5.4% in 1999. The economy grew further by a robust 8.4% in H1 2000. Both external and domestic demand have expanded strongly. Real non-oil domestic exports grew by about 12% in the first six months of 2000, boosted by the continued strength of global electronics demand. The turnaround in the regional economies has underpinned strong service exports and boosted the commerce and transport and communications sectors. Domestic consumption has grown steadily in tandem with labour market conditions and overall sentiment, while investment spending has recovered strongly on the back of a surge in investment in machinery and equipment. Despite the robust economic recovery, inflationary pressures remain subdued. CPI inflation was 0% in 1999, rising moderately to average just 1% in the first six months of 2000. (Based on the old CPI basket before the revision introduced early this year, measured CPI inflation in 1999 would have been slightly higher at 0.4%.)
With regard to legislation, I also believe that further supplementary measures will be needed in future. I will return to this later on. During the recent financial turbulence the Riksbank has not only had regular contacts with other authorities and the political system – we have also had closer contacts with market participants than usual. Central banks around the world have also had close cooperation with regard to reducing the strains in the financial markets in various ways. So what have we at the Riksbank done to make the markets function better? Improving the functioning of the markets The Swedish banks have mainly experienced two problems. One has been the lack of access to more long-term funding in Swedish kronor. The other has been the limited possibilities to borrow in US dollars. As I mentioned earlier, it has been much more difficult and costly for the banks to obtain financing other than at very short maturities. The banks’ possibility to finance themselves is of course important to financial stability. It also affects other interest rates in the economy and thereby the impact of monetary policy. We at the Riksbank try to counteract these effects of the financial turmoil. We have therefore offered the banks financing – against collateral and at an interest rate – at longer durations than normal, and than what is currently available in the markets. We have so far granted loans in Swedish kronor at maturities of three months and six months to a total of SEK 203 billion.