Ravi Menon: MAS Annual Report 2014/15

Transcription

1 Ravi Menn: MAS Annual Reprt 2014/15 Remarks by Mr Ravi Menn, Managing Directr f the Mnetary Authrity f Singapre, at MAS Annual Reprt 2014/15 Media Cnference, Singapre, 21 July Highlight six areas. * * * Ecnmic grwth weaker than expected but nt likely t deterirate further Inflatin cming in at lwer half f frecast range Mnetary plicy cnsideratins driving recent decisins MAS financial perfrmance stable investment gains amidst vlatile currency translatin effects Cnsumer initiatives helping Singapreans manage their finances Financial centre develpment brad-based grwth acrss all segments Ecnmic grwth Ecnmy clearly lst sme mmentum in Q2 2. Real GDP cntracted by 4.6% in Q2 n QQ SAA basis Trade-related industries declined, dragged dwn by weakness in pharmaceuticals, marine & ffshre engineering, and electrnics. Dmestic-riented industries pulled back after strng perfrmance in Q1. But grwth mmentum nt expected t deterirate further in H2 3. First, glbal and reginal ecnmic recvery remains bradly intact shuld prvide supprt fr Singapre s utward-riented sectrs. US ecnmy has regained mmentum. Cntractin in Q1 largely weather-induced. PMI readings shw manufacturing and services sectrs expanding. Cnsumer spending shuld be buttressed by strengthening labur market. In China, picture is mixed. Excess capacity has been weighing n prductin. But mnetary stimulus and steady pipeline f infrastructure prjects will supprt grwth in H2. Latest indicatrs, including services and manufacturing PMIs, suggest ecnmy is stabilising In ASEAN, pick-up in infrastructure spending shuld supprt dmestic demand strengthening US ecnmy shuld prvide gradual uplift t exprts 4. Secnd, dmestic nn-tradable sectrs shuld remain resilient. Cnstructin industry will be supprted by further capacity expansin in transprt infrastructure. BIS central bankers speeches 1

2 Demand fr services such as educatin and healthcare expected t stay firm. 5. Third, financial services shuld cntinue t pull up verall grwth. Underpinned by bank intermediatin, fund management and risk management activities, reflecting demand frm bth dmestic and reginal markets. S, grwth was weak in H1 but is nt expected t weaken further. 6. On YY basis, GDP grwth came in at 2.3% in H MAS and MTI are reviewing grwth frecast fr 2015, taking int accunt weaker utturn in H1 as well as supprt factrs in H2. But risks n glbal macr frnt have increased. 8. MAS clsely mnitring three key risks in external envirnment. First, Greece. Situatin remains highly fluid and uncertain. Failure by Greek gvernment t implement measures agreed with internatinal creditrs culd spark renewed market jitters. Culd dampen cnfidence and recvery in wider Eur area, with spillver effects n rest f wrld. Secnd, China. Dwnside risks have increased. Third, the regin. Inflatin Excess capacity in sme heavy industries culd reduce grwth in investment spending mre than expected. Further vlatility in stck market culd undermine cnsumer cnfidence and spending. Financial cnditins culd tighten mre than expected, as US Fed begins t hike interest rates. This culd raise brrwing csts and cnstrain private spending. 9. Singapre experienced negative headline inflatin fr seven mnths nw. But nt facing deflatin price decline neither persistent nr pervasive. Temprary factrs keeping inflatin muted but underlying cst pressures persist. 10. Lk at headline and cre inflatin separately. Headline inflatin at lwer half f frecast range in 2015 but shuld pick up in Headline r CPI All-items inflatin averaged 0.4% y--y in first five mnths f 2015 cmpared t 1.0% fr whle f CPI All-items inflatin likely t cntinue t be negative fr rest f Fr year as whle, CPI-All items inflatin expected t cme in at lwer half f frecast range f 0.5 t 0.5%. 13. Drag n headline inflatin frm COE premiums and accmmdatin csts. Car COE premiums currently abut $62,000, cmpared t abut $68,000 in H2 last year. 2 BIS central bankers speeches

3 Imputed rentals n wner-ccupied accmmdatin are 3% lwer cmpared t year ag. 14. But headline inflatin t pick up in Effects f lwer car prices and husing rentals culd start t wear ff n YY basis. Cre inflatin als expected t rise. Cre Inflatin shuld stay arund current level befre rising frm Q4 15. MAS Cre Inflatin which excludes accmmdatin csts and private rad transprt csts remains psitive. Hwever, it eased t 0.8% in first five mnths frm 1.9% last year. Fr 2015, cre inflatin is expected t be in lwer half f % frecast range. 16. Cre Inflatin shuld rise gradually frm Q4 nwards and reach clse t its histrical average in H Impact f lwer glbal il prices will wear ff ging int Effect f budget measures t help husehlds cpe with csts f healthcare and educatin will als wear ff And sme recvery in fd prices. 17. Mre fundamentally fr inflatin, ur labur market remains tight. While wage pressures and pass-thrugh frm wage cst t prices have bth been mdest this year, there is every pssibility they culd pick up in Resident unemplyment rate is near 17-year lw Jb vacancy rate at its highest level ver same perid As lng as ecnmy grws clse t its ptential rate, wage pressures can build up quickly. Secnd reasn why we cannt be said t be in deflatin is that mst items in CPI basket cntinue t experience price increases 18. Slightly mre than half f CPI-All Items basket and three quarters f Cre CPI are experiencing mderate price increases. This includes prices f everyday items like fd. Cst f restaurant fd is up 2.5% while hawker fd price is up 2.2% cmpared t year ag. 19. In ther wrds, man-in-the-street (r aunty-in-the-fd-curt) is nt experiencing negative inflatin n a brad scale. Mnetary plicy 20. MAS mnetary plicy decisins in H1 this year attracted fair amunt f interest. Our mnetary plicy statements in Jan and Apr have explained ratinale. But let me take pprtunity t elabrate n cntext f ur decisins. 21. In Jan, MAS reduced slpe f S$NEER plicy band. Came as surprise t market because it was utside ur usual cycle f plicy annuncements in Apr and Oct. BIS central bankers speeches 3

4 Many wndered why MAS culd nt have waited till scheduled plicy review in Apr. Sme even wndered if there were ging t be mre such ff-cycle mves in future given greater uncertainty and vlatility in macrecnmic numbers. MAS had t adjust plicy ff-cycle in Jan because f significant change in inflatin utlk fr We did nt take decisin lightly. Cnsidered tw factrs carefully. Was decline in inflatin likely t persist thrugh 2015? Was there a dwnside t waiting till Apr t adjust plicy? Answer t bth questins yes. 23. Bth CPI-All Items inflatin and MAS Cre Inflatin frecasts fr 2015 were sharply dwn in Jan this year, cmpared t Oct 2014 when we last reaffirmed ur mnetary plicy stance Oil prices had fallen sharply frm US$84 in Oct 2014 t US$47 in Jan 2015 and assessment was that prices were likely t stay lw fr at least a year. Against backdrp f mdest ecnmic grwth in 2014 cntinuing int 2015, wage grwth was weaker than anticipated and s was pass-thrugh int prices. 24. Waiting t adjust plicy in Apr wuld have put MAS cnsiderably behind curve and led t excessive speculatin abut a plicy mve. We decided t adjust bth inflatin frecast and plicy stance in a timely and cnsistent manner. 25. In Apr, MAS affirmed mnetary plicy stance. This decisin surprised sme market bservers, wh had anticipated a further easing f S$NEER plicy. We made n change t plicy stance in Apr because there was n change t frecasts 26. There was n grund fr anther shift in plicy. N reasn t reduce slpe f S$NEER plicy band further, given that cre inflatin was prjected t pick up frm Q4 nwards and ecnmy remained clse t ptential. N reasn t shift level f plicy band, as we did nt envisage deflatin r recessin. N reasn t adjust width f plicy band, which remained sufficient t accmmdate vlatility in freign exchange markets. In effect, MAS frnt-laded plicy adjustment in Jan s that further adjustment was nt necessary in Apr 27. Shift in mnetary plicy stance in Jan was measured: cntinuing t keep S$NEER band n gradual and mdest appreciatin path t ensure price stability ver medium term. Imprtant t keep a medium-term rientatin with regard t setting mnetary plicy 28. If MAS reacted t every shrt-term fluctuatin in utput and prices, it wuld risk intrducing even mre vlatility t markets and ecnmy. This is because: External shcks that culd hit small pen ecnmy like urs can be very frequent 4 BIS central bankers speeches

5 There are cnsiderable lags in mnetary plicy transmissin. Off-cycle plicy shift therefre highly atypical and nly sparingly used. 29. Current plicy stance remains apprpriate fr ensuring medium-term price stability Ecnmy estimated t be clse t its ptential fr Labur market expected t remain at full emplyment Cre inflatin, mst relevant indicatr fr MAS mnetary plicy, expected t strengthen. Next mnetary plicy review is as scheduled in Oct. MAS financial perfrmance 30. MAS P/L was almst in balance in FY2014/15, recrding a small prfit f $0.3 billin. In FY2013/14, we recrded a prfit f $15.8 billin. Prir t that in FY2012/2013, recrded a lss f $10.6 billin. 31. Why s vlatile? Fluctuatins in MAS prfit figures frm year t year is almst entirely due t currency translatin effects, i.e. exchange rate fluctuatins between S$ and majr currencies. When S$ appreciates against majr currencies, there is translatin lss when assets are reprted in S$ Likewise, when S$ depreciates, there is translatin gain But these gains and lsses mean little fr internatinal purchasing pwer f ur OFR which is denminated in freign currencies. 32. Fcusing n verall prfit figure therefre misses larger pint abut MAS underlying investment perfrmance. 33. Investment gains n MAS freign assets have in fact remained relatively stable fr last five financial years. Hlding S$ exchange rate cnstant t strip ut translatin effects, freign investment gains amunted t S$10.4 billin in FY2014/15, cmparable t freign investment gains f S$10.6 billin in FY 2013/14. Helping Singapreans manage their finances 34. A key area f fcus fr MAS in last tw years has been t help Singapreans better manage their finances. A multi-prnged effrt: Encurage prudent brrwing Facilitate retail access t simple, lw-cst investment prducts Spur cmpetitive pricing fr life insurance prducts Educate cnsumers n financial matters Let me elabrate n each. First, MAS has put in place varius measures t encurage prudent brrwing 35. Many safeguards already exist. BIS central bankers speeches 5

6 Amunt f unsecured credit that FI can extend is limited t fur times mnthly incme f brrwer. Limits n bth lan-t-value and lan tenure fr bth husing and mtr vehicle lans extended by FIs. Individuals purchasing prperty are cnstrained n their ttal debt service rati. 36. MAS annunced new unsecured credit rules tw years ag. FIs will nt be allwed t grant further unsecured credit t brrwer whse aggregate unsecured debt exceeds brrwing limit fr 3 cnsecutive mnths. This limit has been set at 24 times brrwer s mnthly incme, and will be lwered t 18 times frm 1 Jun 2017 and 12 times frm 1 Jun Vast majrity f Singapreans manage their debt well. Less than 2% f unsecured credit users affected by industry-wide brrwing limit. Nnetheless, this is abut 22,000 brrwers wh need help t manage dwn their debt. There are measures t help unsecured brrwers pay dwn their debts 38. Banks have wrked with Credit Cunselling Singapre (CCS) t develp a new Repayment Assistance Scheme (RAS). Cnvenient ne-stp slutin fr brrwer t wrk ut centralised repayment slutin with creditrs. Lwer interest rate f 5% p.a. ver repayment perid f 8 years fr debt in excess f 12 times a brrwer s mnthly incme. Secnd cnsumer initiative: facilitate retail access t simple, lw cst investment prducts 39. Last year I spke abut hw MAS was wrking t imprve savings and investment ptins fr retail cnsumers. Made prgress n three frnts. intrduced Savings Bnds fr flexible risk-free returns facilitated access t S$ crprate bnds fr stable, lng-term returns expanded ETF ptins fr diversified equity returns 40. Savings Bnds, crprate bnds, and ETFs cmplement existing investment ptins in the market. Individual investrs nw better able t frm a diversified and balanced prtfli at lw cst. Intrducing Savings Bnds 41. Singapre Savings Bnds are a special type f Singapre Gvernment Securities (SGS) fr the individual investr. Like regular SGS, Savings Bnds ffer same lng-term risk-free returns. Unlike regular SGS, hlders f Saving Bnds nt expsed t price risks when they redeem them early. Savings Bnds prvide flexibility fr investrs t get their mney back t meet unexpected needs fr cash. 6 BIS central bankers speeches

7 42. Pleased t annunce that first Savings Bnd will be issued n 1 Oct Interested investrs will be able t apply fr this issue frm 1 Sep. Details f first issue such as amunt f bnds available and bnd s interest rates will be released when applicatins pen. A new Savings Bnd will be issued every mnth fr at least next 5 years, s there is n need t rush fr first issuance. 43. T help investrs understand features f Savings Bnds and learn hw t apply fr them, MAS has set up dedicated Savings Bnds website and Savings Bnds htline. Details will be made available later tday. Facilitating retail access t S$ crprate bnds 44. Bnds are relatively easy t understand, ffer stable returns that are typically higher than fixed depsit rates, and are less susceptible t extreme price mvements. Many blue chip cmpanies as well as gvernment agencies have issued bnds. 45. But retail participatin in crprate bnd market has been lw. It is cstly fr bnd issuers t tap retail market. Minimum lt sizes are at least $200, MAS and SGX are reducing cst f retail bnd issuance and making it easier fr retail investrs t buy crprate bnds listed n SGX. Bnd Seasning Framewrk and Exempt Bnd Issuer Framewrk will allw eligible crprate issuers t issue bnds t retail investrs at lwer cst in minimum denminatins f $1,000, while ensuring sufficient safeguards fr investrs. Prpsals fr bth initiatives have been put ut fr public cnsultatin and respnse has been psitive. MAS will finalise and annunce rules sn. Expanding ETF ptins 47. Equity investment ffers ptential fr higher returns cmpared t regular savings and fixed incme prducts. But investing in individual stcks entails higher risks and expsure t market vlatility. 48. Exchange-traded funds (ETFs) can be lw-cst way fr investrs t gain expsure t basket f underlying equities t build a well-diversified investment prtfli. ETFs als give investrs expsure t varius asset classes including bnds and cmmdities. 49. MAS has made it easier fr retail investrs t access mre ETFs. Previusly, all ETFs using derivatives were classified as cmplex r Specified Investment Prducts (SIP) they culd nly be sld t retail investrs with enhanced safeguards. Have refined ur rules t allw less cmplex ETFs which make limited use f derivatives t be reclassified as Excluded Investment Prducts (EIP) these can be sld mre easily t retail investrs % f AUM f SGX-listed ETFs are nw classified as EIP ETFs that investrs can purchase as easily as they buy individual stcks. Third cnsumer initiative: spur cmpetitive pricing fr life insurance prducts 51. MAS wrked with industry and CASE t create a new nline prtal, cmparefirst. BIS central bankers speeches 7

8 Will enable retail cnsumers t easily cmpare key features f life insurance prducts ffered by varius insurance cmpanies Since its launch in Apr, cmparefirst has registered healthy interest, with ver 180,000 visits t prtal and mre than 110,000 prduct summaries dwnladed. Cnsumers and industry have prvided psitive feedback n cnvenience and ease f use f cmparefirst. 52. MAS has als wrked with industry t make available Direct Purchase Insurance (DPI). DPI ffers cnsumers access t selected term life and whle life insurance prducts sld withut cmmissins r financial advice Mre than 200 DPI plicies have been sld in first three mnths f launch, with a further 100 applicatins pending apprval by insurers. 53. cmparefirst and DPI have spurred mre cmpetitive pricing fr life insurance prducts. Sme insurers have lwered prices f bth their DPI and nn-dpi insurance prducts, since intrductin f these initiatives. Furth cnsumer initiative: enhance financial educatin 54. MAS is stepping up effrts t prmte greater public awareness f simple, lw cst financial prducts as well as cmparefirst and DPI. 55. MneySENSE, natinal financial educatin prgramme, is centrepiece f this effrt. 56. MAS will cntinue t wrk with industry, schls, and ther gvernment agencies t enhance financial literacy amng Singapreans s that they can take sund financial decisins. Institute fr Financial Literacy (IFL), a cllabratin between MneySENSE and Singapre Plytechnic, delivered ver 1,500 talks and wrkshps t almst 50,000 wrking adults since its launch in MneySENSE will partner schls in use f gamificatin t reach primary and secndary schl students in fun and engaging way. 57. Last year, I asked fr media s help in ur financial literacy effrt. Heartened by media s supprt, wrking with us, with industry, and n yur wn, t carry messages n financial educatin. We lk t media s cntinued supprt fr MneySENSE initiatives. Financial centre develpment Financial sectr grwth: brad-based and higher than verall ecnmy 58. Financial services grew by 7.7% last year, cmpared t verall GDP grwth f 2.9%. Since recvery frm GFC, financial sectr grwth has utpaced verall ecnmy. Sectr grew by average 8.2% during , nearly twice verall ecnmic grwth f 4.2%. Grwth has als been brad-based: acrss mst business segments. 59. Essentially an Asian grwth stry: 8 BIS central bankers speeches

9 Rise f Asian middle class and grwing affluence has generated demand fr variety f financial services, including wealth management and insurance Grwth f Asian crprates has driven demand fr ffshre lending, freign exchange trading, capital market activities, and risk management. 60. Sme highlights in past year: Assets under management (AUM) rse by 30% frm S$1.8 trillin in 2013 t ver S$2.3 trillin in Freign exchange trading, measured by average daily turnver vlume, increased by 40% frm a year ag t reach US$480 billin in Octber Offshre nn-life insurance, measured by grss written premiums, grew 8.8% yearn-year t S$8 billin in Crprate debt issuance grew 13% in 2014 as utstanding debt reached S$300 billin. Infrastructure financing space becming mre active. 61. Singapre already serves as imprtant infra financing hub, with 60% f infra financing transactins in ASEAN led by prject finance teams based in Singapre. MAS wrking clsely with industry t develp tlkit fr standardised public-private partnership cntractual clauses. This will: enhance bankability f infra prjects; and facilitate subsequent capital market refinancing Aim in cming years is t enhance infra financing ecsystem: Wrk with MDBs t increase supply f bankable prjects Facilitate greater institutinal investr participatin in infra assets. RMB market has taken ff well. 62 Singapre currently secnd largest ffshre RMB hub in wrld. RMB depsits grew mre than 20% year-n year. Average daily RMB FX turnver grew mre than tw times in RMB is nw ne f tp 5 mst actively traded currencies in Singapre. Aim in cming years is t: Grw RMB capital market activities, including thrugh prmting RMB bnd issuance; Enhance RMB asset management capabilities, leveraging n RQFII; and Prmte crss-brder RMB financing, building n RMB pilt fr Suzhu Industrial Park and Tianjin Ec-city. Making cncerted effrts in tw areas that cut acrss asset classes: skills and technlgy. 63. First, SkillsFuture. We want t be a financial centre that is amng leaders glbally in wrkfrce skills and expertise, with a strng cre f Singapreans at every level. BIS central bankers speeches 9

10 MAS in partnership with industry and educatinal and training institutes, will undertake initiatives t strengthen supprt fr finance prfessinals t: learn cntinuusly, develp expertise, and make strng cntributins thrughut their prfessinal careers. 64. Secnd, Smart Financial Centre. We want t be a financial centre where innvatin is pervasive and technlgy is used effectively t: increase efficiency, create new pprtunities, manage risks better, and imprve peple s lives. MAS in partnership with industry will drive initiatives t create a vibrant ecsystem fr innvatin and adptin f new technlgies while fstering safety and security. 10 BIS central bankers speeches