ANCHOR OF ECONOMIC

AND FINANCIAL STABILITY

THE ECONOMY
SUBDUED GROWTH IN THE GLOBAL ECONOMY

Global economic growth slowed in 2015 to 3.9% from 4.1% in 2014. While the G3 economies remained on a moderate growth trajectory, Asia ex-Japan recorded weaker outturns.

Amid muted external demand, the United States (US) and Eurozone posted relatively firm GDP gains on the back of strong private consumption, but Japan's recovery was more tentative. In Asia ex-Japan, China's growth moderation and the generalised slowdown in global trade flows have weighed on the region's economic activity, particularly in the externally-oriented economies. However, for the second consecutive year, resilient domestic demand in the ASEAN-4 economies provided some offsetting support.

Major central banks have pursued increasingly divergent monetary policies. The steady recovery in the US economy over the past few years enabled the Federal Reserve to raise rates by a notch in December 2015, though the pace of subsequent policy normalisation will likely be gradual. In comparison, sluggish growth and below-target inflation have compelled the European Central Bank (ECB) and the Bank of Japan (BOJ) to intensify monetary easing. The ECB initiated a full-fledged Quantitative Easing programme in March 2015 and subsequently lowered interest rates further into negative territory in December. In January 2016, the BOJ joined the ECB in implementing a negative interest rate policy while the latter expanded the size and scope of its asset purchase programme in March.