Monetary Authority of Singapore Annual Report 2012/2013
Anchor of Economy


A Year of Tepid Growth

The year 2012 began on a cautiously optimistic note after a series of shocks reduced average GDP growth in Singapore’s key trading partners to 4.4% in 2011.1 However, a confluence of new uncertainties, including the escalation of the debt crisis in Greece, the threat of the “fiscal cliff” in the US, and fears of a sharp slowdown in China, caused the world economy to lose momentum again in mid-2012. As a result, external growth fell further to 3.9% for the year—the slowest pace of expansion since the Global Financial Crisis.

Nonetheless, robust policy responses by central banks in the advanced economies helped to stabilise financial conditions and triggered a rally in stock markets that carried over into early 2013. Most notably, the European Central Bank’s announcement of Outright Monetary Transactions (OMTs), promising unlimited support for vulnerable member states under certain pre-conditions, reduced the tail risk of a Euro zone exit. The US Federal Reserve followed up with a third round of quantitative easing measures, committing to purchase mortgage backed securities until the labour market shows a substantial improvement. In November 2012, the newly-elected Japanese government announced ambitious plans to reflate the economy through generous fiscal stimuli and bold monetary easing, giving a further boost to confidence.

1   External GDP growth is weighted by country shares in Singapore’s NODX.