The future of global trade and economic integration remain the biggest unknown for 2017, said Managing Director of the Monetary Authority of Singapore (MAS) Ravi Menon on Monday.
Speaking at the UBS Wealth Insights Conference, Menon said that the U.S. policy measures against free trade may well attract retaliatory measures, leading to trade conflicts with disastrous consequences to the global economy.
These include possible actions of rejecting the Trans-Pacific Partnership, imposing a border tax and corporate tax rate on imports and labeling major trade partners as currency manipulators, said Menon.
While a shift in the macro policy mix in the United States is to be welcomed, Menon underlined that the growth spillover from the United States to the rest of the world will depend on the balance between fiscal stimulus on the one hand and financial tightening and trade restrictions on the other.
In all likelihood, there is still uncertainty around Trump's policies and support for free trade remains strong among the U.S. establishment, he said.
Menon also reminded that as populist movements are on the rise in many parts of the world, they could lead to a more radical shift in policies which in turn dampen confidence and investment.
"Singapore will not be immune to the global tightening of financial conditions, volatility in capital flows, and potential stresses in the regional corporate sector," he added.
Singapore is expected to continue a modest pace of expansion, with authorities forecasting a growth of one to three percent for this year.
As economic restructuring remains a work-in-progress for Singapore, it should do more to raise productivity growth, Menon said.
