Yahoo Finance World faces ‘long storm’ of inflation, food shortages, says Singapore’s Tharman
By David Ramli and David Scanlan
(Bloomberg) — The world is being challenged by a “perfect long storm” of geopolitical risks, food shortages, climate change and prolonged inflation, according to the chairman of Singapore’s central bank.
“We are facing risk and fragility that is unprecedented in the last 80 years,” Tharman Shanmugaratnam, who’s also the country’s senior minister, said at the IMAS-Bloomberg Investment Conference in Singapore on Wednesday. Russia’s invasion of Ukraine represents a “rupture” of rules that preserve global stability, he said.
The war is adding fresh inflation and supply chain pain to a global economy still trying to recover from the pandemic. Oil prices have surged to the highest since 2008 and fears of food shortages are rising, pressuring consumers and challenging policy makers and governments.
“Stagflationary pressures are now a serious risk,” he said. “Higher-for-longer inflation is now very likely.”
Singapore — a rich Southeast Asian business hub that closely watches geopolitical developments as it balances competing pressures from China and the US — decided last month to impose unilateral sanctions against Russia, joining the US-Europe-led effort to isolate Moscow. The Monetary Authority of Singapore has also been vigilant over inflation, tightening policy twice since October as it faces higher import prices.
“We can’t operate on the basis of forecasts or scenarios that reflect our hopes, as distinct from what is possible,” he said, adding that both Ukraine and the pandemic were examples of risks being ignored or downplayed.
Liberals “Energised”
The minister said global stability is akin to oxygen for the international economic system, but is going through a major rupture with no solution available yet, as he urged both China and the U.S. to reach a new understanding that does not involve creating alternative systems that compete with each other.
Tharman added that Russia’s actions have energised global support from countries and companies for the liberal order, which he defined as an open and rules-based global system that preserves the sovereignty and territorial integrity of nations.
Going Defensive
Meanwhile, GIC Pte Chief Investment Officer Jeffrey Jaensubhakij told a panel that policy makers have less room to counter a massive economic slowdown than in March 2020, even though there are positives in the market like the reopening of tourism in some places thanks to omicron’s relative mildness.
The sovereign wealth fund executive recommended investors go defensive and hunt for instruments offering returns that could beat inflation.
“Chinese government bonds and very few others - those are the types of assets that we should be pushing our clients towards,” he said, while pointing to the beneficiaries of the commodities boom as another source of opportunities.
(Adds further comments from Singapore minister and GIC CIO from 6th paragraph)
©2022 Bloomberg L.P.
