1. Global Financial Crisis
Impact on Singapore and
Policy Measures Taken to Counter It
Policy Brief – Presentation
17th November, 2012
Vikas Sharma, PMP® 1

2. Section Policy Brief – Presentation
1 Global Financial Crisis
GDP Growth Rates (YoY) Stock Market (month-end) US$ Appreciation against local
Countries
Q3-2008 Q4-2008 Q1-2009 Q2-2009 June-08 March-09 Change (%) June-08 March-09 Change (%)
US 0.7% -0.8% -3.3% -3.8% 11,350 7,608 -33.0% - - -
Eurozone 0.6% -1.4% -4.9% -4.8% 3,315 2,036 -38.6% 1.57 1.32 -15.9%
Japan -0.2% -4.3% -8.7% -7.2% 13,481 8,109 -39.8% 106.21 98.96 -6.8%
Korea 3.1% -3.4% -4.2% -2.2% 1,674 1,206 -28.0% 1,046.05 1,383.10 32.2%
Hong Kong 1.7% -2.5% -7.8% -3.8% 22,102 13,576 -38.6% 7.79 7.75 -0.5%
Thailand 3.9% -4.3% -7.1% -4.9% 768 431 -43.9% 33.44 35.50 6.2%
Malaysia 4.7% 0.1% -6.2% -3.9% 1,186 872 -26.5% 3.26 3.64 11.7%
Philippines 5.0% 4.5% 0.6% 1.5% 2,459 1,986 -19.2% 44.95 48.32 7.5%
Taiwan -1.0% -8.4% -10.1% -7.5% 7,523 5,210 -30.7% 30.35 33.91 11.7%
Singapore 0.0% -4.3% -9.5% -3.5% 2,947 1,699 -42.3% 1.35 1.52 12.6%
Indonesia 6.4% 5.2% 4.4% 4.0% 2,349 1,434 -39.0% 9,228.00 11,700.00 26.8%
Different from previous crises in that it Had its genesis in imbalances that had
started at the ‘core’ of the world been building up and needed unwinding
economy and spread to the periphery, – 1. Current accounts
instead of the other way round 2. Risk premiums in the financial sector
Triggered in the financial sector but
A truly ‘global’ crisis that caused a
fallout pervaded to the real economy –
‘synchronized’ economic downturn.
drop in global trade, industrial
Decoupling theory laid to waste as both
production, high unemployment, equity
advanced and developing economies hit
market corrections
Vikas Sharma, PMP® 2

3. Section Policy Brief – Presentation
2 Impact on Singapore
1
Banking & Financial
Sector
2 3
Foreign Direct
Trade Impact on
Investment
Singapore
4 5
Real Economy Labor Market
Vikas Sharma, PMP® 3

4. Section Policy Brief – Presentation
2 Impact on Singapore
1
Banking & Financial
Sector
2 3
Foreign Direct
Trade Impact on
Investment
Singapore
4 5
Real Economy Labor Market
1
Banking & Financial
Sector
Local banks had minimal exposure to toxic assets linked to US home
mortgages or distressed financial institutions
Isolated cases of toxic structured notes sold by local banks caused
much public protest and embarrassment for banks/regulators
Immediate impact was on share prices of local banks as eroded
customer confidence made them plummet by more than 50%
As crisis unfolded, NPLs rose (to 2.5% in Q2 09); overall lending
contracted (16% drop from Oct 08 – Sep 09; risk-aversion increased;
SME borrowers turned away
Vikas Sharma, PMP® 4

5. Section Policy Brief – Presentation
2 Impact on Singapore
1
Banking & Financial
Sector
2 3
Foreign Direct
Trade Impact on
Investment
Singapore
4 5
Real Economy Labor Market
2
Trade
In the run up to the GFC, Net Exports were driving Imports/Exports
Singapore’s GDP growth: over 1990-2007, other GDP 30.00%
components stayed stable or declined 20.00%
10.00%
Starting Q407, Net Exports plunged as imports
decreased at a slower rate than exports 0.00%
Net Exports
-10.00%
Direct exports to G3 fell as demand there slowed. Exports
-20.00%
This further caused decline in intermediate exports Imports
that formed bulk of SG’s trade with regional markets -30.00%
-40.00%
Appreciation of S$ against other Asian countries
-50.00%
meant that local exporters (esp. Electronics) found it
more difficult to compete with regional competitors -60.00%
Vikas Sharma, PMP® 5

6. Section Policy Brief – Presentation
2 Impact on Singapore
1
Banking & Financial
Sector
2 3
Foreign Direct
Trade Impact on
Investment
Singapore
4 5
Real Economy Labor Market
3
Foreign Direct
Investment (FDI)
FDI forms a disproportionately high part of Singapore’s gross capital
formation (60% in 2007 vis-à-vis <10% for other Asian countries)
As export revenues plummeted and profit margins
contracted, foreign investment in local export-manufacturing
industries fell too;
From S$7.8 billion to just S$0.7 billion over Q1-Q3 2008
Vikas Sharma, PMP® 6

7. Section Policy Brief – Presentation
2 Impact on Singapore
1
Banking & Financial
Sector
2 3
Foreign Direct
Trade Impact on
Investment
Singapore
4 5
Real Economy Labor Market
4
Real Economy
The GFC permeated into the real economy via transmission channels of
trade and financing – manifested in a 32% for Singapore’s IPI (Mar08-Mar09)
and worsening of General Biz. Expectations (+25 in Q307 to -57 in Q408)
Export-heavy manufacturing sectors such as Electronics and
Chemical/Chemical Products were the worst hit
In the Services sector, Singapore’s linkages to the global economy via
industries like Transportation, Logistics, Tourism etc. also contributed to the
slowdown of economic activities locally
Singapore’s flourishing tourism industry was hard hit with both number of
arrivals as well as spending/arrival going south. Receipts grew by 4.8% in
2008, compared to 14% in 2007
Vikas Sharma, PMP® 7

8. Section Policy Brief – Presentation
2 Impact on Singapore
1
Banking & Financial
Sector
2 3
Foreign Direct
Trade Impact on
Investment
Singapore
4 5
Real Economy Labor Market
5
Labor Market
Towards the end of 2008, lowered economic activity and business
sentiments led to hiring freezes, wage pressures & redundancies
Job creation fell by 50% between Q3-08 and Q4-08; Redundancies rose
almost 6-folds from Q2-08, peaking in Q1-09. Manufacturing worst hit (70%)
However, unemployment rate not as bad as in the previous recessions.
Peaked at 3.4% in Sep 09, around half of the 6.2% peak in Sep 03
Resilience could be attributed to fiscal measures and to continued demand
from Construction (MBFC, IRs, Downtown MRT Line) and Services (retail,
F&B, hotels etc. sprouting up in the IRs)
Vikas Sharma, PMP® 8

9. Section Policy Brief – Presentation
3 Singapore’s Policy Responses to the GFC
Banking &
Financial
Sector
Measures
Singapore’s
Response
Monetary Fiscal
Policy Policy
Measures Measures
Vikas Sharma, PMP® 9

10. Section Policy Brief – Presentation
3 Singapore’s Policy Responses to the GFC
Banking &
Financial
Sector
Measures
MAS announced blanket guarantee on deposits of individuals and non-
bank customers in financial institutions holding MAS licenses (backed
by S$200 billion of Singapore Government reserves
MAS became one of 13 central banks globally to open a US$30 billion
swap facility with the Federal Reserve in order to ensure availability of
liquid funds for financial institutions
MAS cracked down hard on banks involved in distribution of structured
notes linked to toxic assets/institutions. Imposed bans on sale of any
structured notes by 10 financial institutions locally for 6-24 months;
published consumer guides on understanding such products
Vikas Sharma, PMP® 10

11. Section Policy Brief – Presentation
3 Singapore’s Policy Responses to the GFC
Monetary
Policy
Measures
MAS had been following a policy (for 4 years) of gradual appreciation of the S$
NEER (net effective exchange rate) going into the GFC to control
inflation/encourage exporters to be move into higher value-add goods
As the crisis broke out, MAS responded by abandoning the appreciating S$
stance and shifting to zero-appreciation in Oct 08. As crisis deepened, MAS
maintained zero-appreciation but re-centered the policy band for S$ NEER lower
in Apr 09, in a way, allowing the S$ to depreciate a little
Interesting to note that policy stance was UNLIKE during AFC and SARS crisis
(when S$ was allowed to depreciate significantly). Instead, MAS declared its firm
confidence in Singapore’s economic fundamentals and only shifted to a
neutral/slightly depreciating stance
Vikas Sharma, PMP® 11

12. Section Policy Brief – Presentation
3 Singapore’s Policy Responses to the GFC
Fiscal
Policy
Measures
Deficit of S$8.7 billion
incurred in FY09
(3.5% of GDP)
Resilience Package (S$20.5 billion)
Preserving Jobs Credit Scheme; Skills Programme for Upgrading
S$5.1 billion
Jobs & Resilience; Enhanced Workfare Supp. Scheme
Stimulating Special Risk-Sharing Initiative (SRI):
S$5.8 billion
Bank Lending 1) Bridging Loan Programme 2) Trade Financing
Enhancing Biz Corporate Tax Rate reduced further to 17%;
S$2.6 billion
Cashflow 40% property tax rebate for commercial assets
Supporting Personal Income Tax rebate; Doubled GST credits;
S$2.6 billion
Households Increased allowances/topups; 40% property tax cut
Infrastructure Brought forward several projects: HDB lift-upgrading,
S$4.4 billion
Improvements schools, sewage projects, military facilities etc.
Vikas Sharma, PMP® 12

13. Section Policy Brief – Presentation
4 Assessment of Singapore’s Policy Response
Unlike several other countries in the region, Singapore did not depreciate it’s
currency and risk inflation in a bid to stem the economic downturn
Singapore’s strong macroeconomic fundamentals allowed it ‘breathing space’ with
its crisis response. Policymakers were able to take strong measures to stem short-
term turbulence without eroding stakeholder confidence in long-term prospects
Singapore’s sometimes-maligned ‘big brother’ governance approach actually
worked to its advantage when responding to the crisis as various agencies were
able to leverage on their close cooperation and well-maintained databases to
implement measures swiftly
Policymakers shied away from ‘knee-jerk’ generic responses and instead crafted
well thought out, customized policy responses
Vikas Sharma, PMP® 13

14. Thanks for your time
Vikas Sharma, PMP®
+65-914446844
Vikas Sharma, PMP® 14