Chairman's Message

Brightened copy of CM

The global economic backdrop to this year’s MAS Annual Report is of continued uncertainty - on inflation, economic growth, and financial stability.

The surge in global inflation in 2022 disrupted decades of price stability. Major central banks have increased interest rates at an unprecedented pace in response. The global financial system is also undergoing a tenuous adjustment to an era of tighter liquidity conditions. Recent stresses in the banking sector in America and Europe are a reminder of the financial vulnerabilities that have built up during the years of easy money.

Against the backdrop of a weaker external economic environment including a protracted global electronics downturn, we expect the Singapore economy to expand at a slower pace in 2023. Overall GDP growth is projected at around the mid-point of the 0.5% to 2.5% range expected this year, moderating from 3.6% in 2022.

MAS’ monetary policy remains steadfastly focused on medium term price stability. While inflation is still elevated, our five successive monetary policy tightening moves since October 2021 have broken the momentum of price increases and led to a gradual decline in core and headline inflation rates. Acting early and progressively to tighten monetary policy over the period, even as growth uncertainties have increased, has proven appropriate. With imported inflation turning more negative and core inflation expected to ease materially by end-2023, MAS has in its most recent policy review maintained the prevailing rate of appreciation of the S$NEER policy band, so as to keep leaning against imported inflation and help curb domestic cost pressures.

Singapore’s banking system has remained sound and resilient despite the recent turmoil in global financial markets, including the sudden takeover of Credit Suisse and failure of regional banks in the United States. Banks here are well-capitalised and conduct regular stress tests against interest rate and other risks. Their liquidity positions are healthy, underpinned by a stable and diversified funding base. MAS stands ready to provide liquidity through its suite of facilities to ensure that Singapore’s financial system remains stable, and financial markets continue to function in an orderly manner. We will continue to keep a close watch on developments in the economy and financial markets.

Whilst dealing with ongoing macroeconomic challenges, MAS has partnered the financial industry to develop medium-term growth strategies through the Industry Transformation Map (ITM) 2025.  They aim to reinforce the sector’s ability to connect global markets, support Asia’s development, and serve Singapore’s economy, achieve growth of 4-5% and net job creation of 3,000 to 4,000 per year for the financial services sector over the five-year period. Under ITM 2025, MAS will also work with the industry to strengthen Singapore’s capabilities in key areas like philanthropy in wealth management, alternative risk transfer solutions in insurance, private credit, and e-FX. We will further expand the FinTech ecosystem and work with industry partners in developing new digital platforms to enhance industry efficiency, access new markets, and introduce new models in digital finance.

MAS is addressing climate and environmental risks with greater ambition and urgency. Given the centrality of finance in the net-zero transition, MAS has announced a refreshed Finance for Net Zero (FiNZ) Action Plan, setting out strategies to mobilise financing to support transition and decarbonisation activities in Singapore and the region. The plan aims to promote consistent, comparable and reliable climate data and disclosures; deepen resilience through climate scenario stress testing and sound environmental risk management practices; support FIs’ adoption of science-based transition plans; and promote green and transition solutions and markets. 

We have also taken key steps to enhance cross-border payment connectivity with key partner jurisdictions. Singapore’s PayNow and India’s Unified Payments Interface are now linked, enabling customers in both countries to send and receive funds between bank accounts or e-wallets instantaneously. Within ASEAN, besides an earlier linkage with Thailand, we are currently working similarly with Malaysia. MAS is also collaborating with the Bank for International Settlements Innovation Hub on a multilateral solution to link fast payment systems within ASEAN. 

We are making headway in growing an innovative and responsible digital asset ecosystem. We are exploring the potential of distributed ledger technology in use cases such as cross-border payment and settlement, trade finance, and pre- and post-trade capital market activities. We are also working with the industry to look into the potential of tokenisation of financial and real economy assets. 

MAS and the Institute of Banking & Finance will work closely with our tripartite partners to continuously upskill the financial sector workforce and develop deep capabilities for the future of finance. We recently launched a grant scheme to encourage financial institutions to hire and train polytechnic students and graduates. We will continue to build competencies in various growth areas, provide training support for finance professionals at different stages of their careers, develop specialist talent in areas such as sustainability and technology, and groom future leaders in finance through opportunities to gain international exposure and build valuable networks.

On behalf of the Board, I would like to take this opportunity to express our deep appreciation to Emeritus Senior Minister Mr Goh Chok Tong for his invaluable contributions to MAS in various capacities over the last two decades. Mr Goh stepped down from his position as Senior Advisor to MAS in May this year, having served in this role since May 2011. I also thank all MAS staff and our partners for their continuous efforts to preserve MAS’ reputation as a central bank and financial regulator, and to help build a vibrant and forward-looking financial centre in Singapore.  

Tharman Shanmugaratnam