'Small' impact on Singapore economy from Zika: MAS’ Ravi Menon

Patrick John Lim Channel NewsAsia 6 Sep 16;

SINGAPORE: The outbreak of the Zika virus is unlikely to have a significant impact on the Singapore economy, the managing director of the Monetary Authority of Singapore, Ravi Menon, said on Tuesday (Sep 6).

Speaking at a lunch hosted by the Foreign Correspondents Association, Mr Menon said that it is too early to tell what the impact might be. “I would say early indications are that there is some small impact but not likely to be significant for the overall economic outcome, but really it's still early days," he said.

As of Monday, 258 cases of locally transmitted Zika have been confirmed in Singapore.

Travel advisories to Singapore have been issued by several major economies, including the United States and Australia.

Mr Menon also spoke about the unit launched by MAS in August to fight money laundering. He said that the newly created surveillance unit as well as the use of data tracking would enable Singapore to step up the fight against money laundering, but that financial institutions must also play their part.

"Boards and senior management in particular must send a clear signal that profits do not come before values and ethics, and compensation structures must motivate not only high performance but also right conduct," he said.

He declined to specifically address the 1MDB scandal in neighbouring Malaysia which has involved banks based in Singapore.

1MDB, or 1Malaysia Development Berhad, was launched by Malaysian Prime Minister Najib Razak in 2009 and closely overseen by him.

Allegations of a vast international scheme of embezzlement and money-laundering involving billions of dollars of 1MDB money began to emerge two years ago.

Singapore is the first country to take legal action against bankers linked to the scandal.

"We will make more robust risk assessments of financial institutions' business activities, client profiles , geographical connections, transaction volumes and quality of controls," Mr Menon said.

He added that technology that can process huge amounts of data and find tell-tale patterns will be used to monitor illicit fund flows and transactions.

- CNA/AFP/dt/nc

Zika may bite S’pore economy: MAS head
LEE YEN NEE Today Online 6 Sep 16;

SINGAPORE — There are early indications that the Zika outbreak in the Republic could have a small impact on the economy, said Monetary Authority of Singapore’s (MAS) managing director Ravi Menon, after countries including the United States and the United Kingdom issued travel advisories warning pregnant women and those planning to conceive to avoid the city-state for now.

“It’s too early to tell. I would say early indications are that there could be some small impact, but not likely to be significant for the overall economic outcome. But really, it’s still early days,” Mr Menon said at a luncheon organised by the Foreign Correspondents Association (Singapore) on Tuesday (Sept 6) in response to a question on the possible economic impact of Zika.

Mr Menon did not dive into details but analysts at OCBC Investment Research said on Tuesday the recent outbreak and rapid local transmission could have “near-term anticipated effects on visitor arrivals and possibly even domestic consumption” in September.

Besides the US and the UK, Australia, South Korea and Taiwan have also issued travel advisories against pregnant women travelling to Singapore, while Malaysia has installed thermal screening at some of its checkpoints. Leading local travel agency Chan Brothers was quoted by Reuters on Tuesday as saying that there had been no cancellations of inbound tours but that new bookings may slow down.

On Singapore’s overall economic outlook, the central bank chief said there are no clear signs that recession risks have risen. While global growth has been below par, the US economy continues to do moderately well, China has avoided a hard landing and the immediate aftermath of Britain’s vote to leave the European Union did not turn out to be as disastrous as many had expected.

The Ministry of Trade and Industry last month lowered the country’s growth forecast for 2016 from 1 to 3 per cent to between 1 and 2 per cent. “The revised growth figures remain our main baseline forecast… As long as the global economy continues to chart along this modest, moderate pace, I think the Singapore economy should steer clear of recession. Clearly there are risks on the horizon. Tail risks, if they materialise, can make a difference,” Mr Menon said.

But even under a dire scenario, the banking system here will be able to withstand these pressures, he added. He was referring to a recent MAS stress tests on the banking system that included assumptions of major global economies slipping into recession, a sharp depreciation of regional currencies, Singapore’s resident unemployment rate spiking to 6 per cent and another 50 per cent plunge in property prices.

“Under these rather dire conditions, the banks’ NPLs (non-performing loans) could rise to 8 to 10 per cent by the end of 2018. That should not be surprising. What’s important is the banking system will be able to absorb these losses, the banks will continue to meet the Basel minimum capital requirement comfortably and they will have sufficient liquidity to meet their cash flows,” he said.

This resilience did not come about by accident, but from prudence and sound financial management in the industry, Mr Menon added. And Singapore must maintain these attributes to remain a relevant and trusted financial centre.

He also said the central bank is closely watching trends of banks cutting headcount globally, but the number of those affected in Singapore has been “much smaller” compared to other jurisdictions. Among the latest with such plans is Barclays Bank, who was reported on Monday to be cutting another 100 jobs from its IT operations in Singapore and moving some of these positions to India.

“When cost structures change, business activities do respond and what’s happened is lower value added activities that depend on cheap factors of production tend to shift out and hollow out over time, and new activities come in to replace them,” said Mr Menon, who named the new innovation labs, foreign exchange desks, expansion in derivatives trading as among new activities that have sprung up.

“I think we have to look at what’s coming in and what’s going out and seeing overall whether it makes sense, whether the financial sector as a whole is gaining in value added.”

Zika could impact slowing economy, Singapore bank chief says
Marius Zaharia and Anshuman Daga Reuters 6 Sep 16;
A Zika outbreak in Singapore could have a small impact on the almost $300 billion economy, the central bank chief said on Tuesday, as the mosquito-borne virus spreads across the global financial and transit hub.

Ravi Menon, managing director of the Monetary Authority of Singapore, did not give further details, but the outbreak coincides with a dip in overall exports and growth in the trade-dependent economy. Growth is also slowing in China, Singapore's main overseas market.

"It's too early to tell. I would say early indications are there could be some small impact, but it's not likely to be significant from an overall economy outcome," Menon told reporters when asked about the impact of Zika.

"But really, it's still early days," he said at an event hosted by the Foreign Correspondents Association in Singapore.

Small, tropical Singapore reported its first locally infected Zika patient on Aug. 27 and since then, the number of reported infections has reached 275, with 17 more cases reported on Tuesday.

Health officials say the figure will rise, as the Aedes mosquitoes that carry the virus are all over the island, and hospitals have stopped isolating patients.

Prime Minister Lee Hsien Loong was quoted on the Channel News Asia website as calling at a regional summit in Laos for the 10 Southeast Asian countries to "join hands" to fight Zika, while keeping the region open for business and trade.

"It is imperative for us to work together to combat Zika, but we should put Zika in the proper context," Lee said. "Given the presence of the Aedes mosquito, Zika may become endemic in our region, just like dengue."

"We should prepare ourselves for a possibly extended campaign against Zika but ensure that the region remains open and connected for business and trade."

Last month, Singapore narrowed its economic growth forecast for the year to 1-2 percent from 1-3 percent growth previously expected, citing concerns over Brexit and weak global demand.

Economists said tourism and retail would be the areas most affected by Zika, which could in turn hold back growth. Tourism arrivals in the first six months of the year have increased 12.5 percent from a year ago, official statistics show.

"Tourism is about voluntary trips and this is going to have a dent," said Trinh Nguyen, senior economist for emerging-market Asia at French investment bank Natixis SA in Hong Kong.

"Zika will impact sentiment and people's already low propensity to consume."


Retail sales excluding motor vehicles fell year-on-year in June for the fifth straight month, as worries about the sluggish global economy drove Singaporeans to cut spending.

Singapore is due to host a Formula One motor-racing Grand Prix next week. Promoters of the race say preparations are going on as usual. The Tourism Board says Singapore remains a safe destination.

Chan Brothers Travel, one of Singapore's biggest travel agencies, told Reuters there had been no cancellations but new bookings may slow down.

While most people experience mild symptoms, Zika infections in pregnant women have been shown to cause microcephaly, a severe birth defect in which the head and brain are undersized. In adults, it can cause a rare neurological syndrome called Guillain-Barre.

Zika is also affecting large parts of Latin America and the Caribbean, with Brazil the hardest hit. In Southeast Asia, Malaysia, the Philippines and Thailand have also reported Zika infections.

Regional health experts said a lack of adequate testing meant the spread of Zika was likely significantly under-reported.

(Additional reporting by Masayuki Kitano, Fathin Ungku and Saeed Azhar; Editing by Miral Fahmy, Robert Birsel)

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