A financial crisis is a sure way of thwarting economic growth, as we saw nine years ago. What is the risk now? From one perspective, the wide-ranging post-crisis regulatory reforms have made the global financial system more robust and resilient. Large banks are stronger, more liquid, less leveraged. Derivative markets are safer, with central clearing covering more than 90% of OTC derivatives trades in the major jurisdictions. Yet, from another perspective, the risk of financial instability is not small. This is mainly due to the build-up of leverage in recent years. In the G7 economies, the ratio of government debt to GDP has increased by 45 percentage points since the crisis and is now at its highest since World War II. 5/7  BIS central bankers' speeches  In emerging Asia, corporate debt issuance has ramped up to about $ billion p.a. since 2014, three times the average volume in the preceding five years. Household debt has built up sharply in many advanced as well as emerging market economies, with escalating house prices a key driver. High leverage is a risk factor for financial instability. I spoke earlier about how an increase in interest rates in a high leverage environment can create debt servicing pressures. If these pressures lead to widespread credit defaults, financial instability is usually not far off. Another channel of causation from high leverage to financial instability is through sharp corrections in asset prices, particularly real estate prices.
Ravi Menon: The Goldilocks economy - will the three bears return?" Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the UBS Wealth Insights Conference, Singapore, 15 January 2018. * * * Mr Edmund Koh, UBS Head of Wealth Management Asia-Pacific, Ladies and gentlemen, good morning. Let me first wish everyone a happy 2018. And also thank UBS for the invitation to speak at this conference. Global growth about as good as it gets 2017 has been a good year for the global economy. World GDP is estimated to have grown by 3.8%, significantly higher than the 3.2% registered in 2016. This is the strongest pace of expansion since the rebound from the global financial crisis in 2010. All indications are that 2018 will be another good year. Most of the world’s major economies are expected to continue strengthening over the course of this year. The IMF expects growth in 2018 to be even better than 2017. There are good reasons for optimism. The most encouraging is investment. Investment expenditure, which had been largely missing from the GDP growth numbers since the global financial crisis, is coming back. Global fixed investments have rebounded by almost 6% in 2017, after contracting in the previous two years. Trade is another piece of good news. Growth in global trade has almost doubled to 4% in 2017, outpacing world GDP growth. This has arrested a worrying trend since 2011, with global trade growing slower than global GDP.