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Slowdown in global demand seen as biggest threat to Singapore's economy

A slowdown in global demand could create unemployment similiar to the 2008 economic crisis, but GIC's advisor and chair of global investments, Mr Ng Kok Song, is less worried about a severe market and economic downturn now, compared to 2008.

SINGAPORE: The biggest threat to Singapore's economy and its banking system is a slowdown in global demand, which could create unemployment, like what happened during the 2008 economic crisis. But GIC's advisor and chair of global investments, Mr Ng Kok Song, said this scenario can probably be averted.

Speaking at the OCBC Global Treasury Regional Forum, Mr Ng, who is also GIC's former group chief investment officer, said he was less worried about a severe market and economic downturn now, compared to 2008. He was responding to a question on Singapore's vulnerability to ongoing deleveraging in the global economy.

The prolonged years of depressed interest rates may have fuelled asset bubbles, such as in property, but Mr Ng said the leverage that has been built up is not in the banks but in the non-financial sector.

Mr Ng said: "The difference between leverage in the financial sector and the non-financial sector is that for the financial sector, when there is a major drop in asset prices and solvency of banks is called into question, then you have a global panic, such as what we saw in 2008 following the collapse of Lehman Brothers.

"So I do not think we are talking about the same thing. There is considerably less leverage in the global system, so any kind of correction, I think it is going to be less drastic and perhaps will be quite manageable."

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