Singapore GIC: Risk Of Economic Stagnation, Then Inflation
14 November 2009 - 7:04PM
Dow Jones News
The world faces the risk of economic stagnation as it pulls out
of steep economic downturn, but this could be followed by inflation
if policymakers aren't careful, Singapore's sovereign wealth fund
said Saturday.
"We appear to have avoided a global depression and are now in a
global recovery," which will extend into next year, Tony Tan,
deputy chairman of Government of Singapore Investment Corp., told a
panel during the annual summit of the Asia-Pacific Economic
Cooperation forum in Singapore.
"I expect higher stagnation risk in the medium term to be
followed by higher inflation risk after that," Tan said.
"Over the next one to three years, weak growth and excess
capacity will be strongly disinflationary," he said. "However,
beyond that, over the next five to 10 years, policy errors or
political pressure could lead central banks to accommodate higher
inflation."
Countries that have racked up little debt, especially in Asia
and parts of Latin America, will recover strongly and "in the short
term, the bounce could surprise on the upside," Tan said. But
activity in "over-leveraged developed economies," especially
consumption in the U.S. and U.K., will likely not be as robust as
in previous recoveries, he said.
More broadly, "Over the next decade, it looks like economic,
political and market risks are going to be higher than the last 20
years before the crisis," Tan said.
"Over time the rise of (emerging markets)--especially China,
India and Russia--could, together with competition for limited
natural resources, lead to higher geopolitical risks," he said.
GIC is the world's fourth-largest sovereign wealth fund in terms
of money managed, according to Deutsche Bank
-By P.R. Venkat, Dow Jones Newswires; +65 64154 152;
venkat.pr@dowjones.com
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