Monetary Authority of Singapore Annual Report 2011/2012
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MACROECONOMIC AND FINANCIAL DEVELOPMENTS

The Global Economy Slowed in 2011

After growing strongly by 6.3% in 2010, the global economy slowed at the turn of 2011 as domestic demand in the G3 softened and Asia’s cross border production networks were disrupted by the tragic earthquake and tsunami in Japan.1 Political unrest in the Middle East/North Africa (MENA) region resulted in higher oil prices, thus crimping real incomes and spending even as households in the advanced conomies continued to repair their financial balance sheets.

The soft patch in global growth in the early months of 2011 persisted into the rest of the year. Worries that Greece would be forced into a disorderly default, as well as a threatening fiscal impasse in the US triggered a loss of consumer and business confidence. In Asia, severe floods in Thailand disrupted regional electronics and automobile supply chains for the second time, causing industrial production and exports to contract in the affected economies.

As a result of both demand and supply shocks, the global economy expanded by a more moderate 4.3% in 2011. Nevertheless, growth prospects improved in early 2012, albeit modestly, following more positive economic data in the US, and a tentative stabilisation of financial conditions in the Euro zone.

1   World and regional GDP are weighted by shares in Singapore’s NODX.