World faces risk from four areas: Tharman

World faces risk from four areas: Tharman

As economic issues in the United States and reforms in China show, the world still faces much uncertainty even though it is well past the 2008 financial crisis, Deputy Prime Minister Tharman Shanmugaratnam said on Wednesday.

He told the Skybridge Alternatives Conference at Marina Bay Sands that the global economy faces four major sources of risk.

The first source of uncertainty in the world is the US, "still the most important determinant of what happens in the rest of the world", noted DPM Tharman.

"The capital markets are forward-looking, and they will always run ahead. That interaction between the market and policymakers is itself an uncertainty," he said.

Meanwhile, as jobs growth and corporate investment remain sluggish, cyclical problems in the US economy could become structural issues.

Mr Tharman pointed out: "There is a risk that the US economy settles at a level below its previous potential, which means that if you continue with highly accommodative monetary policy, we get financial risk building up without any real economic benefit."

The second issue is China's major structural reforms - one of the most complex exercises of such policy changes in any economy in the past 50 years.

"The complexity of the matter comes from the fact that there are several reforms that have to be taken simultaneously because they interact with each other," Mr Tharman said. These include revising monetary, fiscal, social policies, and shaking up state-owned enterprises.

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