SINGAPORE - The eurozone crisis is the main risk facing Singapore’s economy and financial system, the central bank said Wednesday, warning the nation to brace for “a more adverse turn of events”.
Ravi Menon, managing director of the Monetary Authority of Singapore, said any sharp deterioration in the eurozone, the city-state’s biggest export market, could hurt economic growth and lead to a drying up of bank credit.
“The key risk facing the Singapore economy and financial system is the ongoing crisis in the eurozone,” Menon said at a news conference.
“While eurozone governments have taken important steps to deal with the crisis, we must be prepared for a more adverse turn of events.”
Turmoil in the eurozone continued to cast a shadow across global financial markets Wednesday after Spanish borrowing prices hit a new historic high amid fears that Madrid will soon need a full-blown bailout.
Singapore could see a drying up of bank credit similar to the aftermath of the collapse of US bank Lehman Brothers in 2008 that hammered global markets, Menon said.
“Already, we have seen some retraction in eurozone banks’ trade finance activities in Asia, but local and global banks have stepped in to fill the void,” he said.