Ravi Menon: The global economy – securing a return to normalcy Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Citibank 10th Annual Asia-Pacific Investor Conference, Singapore, 30 January 2013. *  *  *  Mr Stephen Bird, Asia Pacific CEO, Citigroup, distinguished guests, ladies and gentlemen, good morning. The long shadow of the financial crisis 1. The global economy is stuck in a hesitant and uneven recovery. In a way, we should not be surprised. The seminal work by Carmen Reinhart and Kenneth Rogoff suggests that exits from severe financial crisis take at least a decade. By this metric, we have already passed the mid-way point of the healing process. But the experience of countries emerging from the long shadow of the 2008/2009 financial crisis has been different. US: steady deleveraging plagued by fiscal uncertainty 2. The US economy has already exceeded its pre-crisis peak. This is encouraging, considering that the recent recession was the deepest the country had experienced since the Great Depression. •  Fiscal and monetary stimuli have been decisive, putting the US on a stronger recovery compared with Europe. •  Private sector deleveraging has proceeded steadily. Household debt has come down to 113% of disposable incomes in Q3 2012, from 134% in Q3 2007. •  The biggest drag on the economy – the housing market – is turning around. House prices have been rising steadily since February 2012 and new houses are being built at a healthy pace. 3.
Given that, owing to structural reasons, the general level of interest rates is substantially lower than in the past, the vast majority of our investments can therefore be expected to deliver only a very modest return going forward. The development of share prices and exchange rates will therefore be determining factors with regard to the profits in the coming years. Given that these are by their nature subject to marked fluctuations, predicting the medium-term return on our assets is fraught with particularly high uncertainty. The approach set out in the new profit distribution agreement addresses this issue. Should the high earnings of recent years prove to be sustainable, the Confederation and the cantons will participate in them. However, should the net profits quickly dwindle, there will be an orderly reduction in the distributions based on the set thresholds. This brings me back to the demands for greater distributions that I mentioned at the start of my speech. Ladies and gentlemen, the rise in the allocations to the provisions coupled with the increase in the maximum profit distributions represent a balanced solution. On the one hand, it contributes to the robustness of the SNB’s balance sheet. On the other hand, barring any financial market upheaval, it allows for substantial amounts to be distributed to the public sector, in the best case totalling CHF 36 billion for the financial years 2020 to 2025. The distributions have not been raised as a response to the coronavirus crisis or higher government debt.