Effects of Euro Zone Crisis on Singapore
The total trade amount in Singapore is 3 times its GDP making it one of the most open economies in the world. The euro zone crisis has been described as the major risk the country is facing especially in respect to its financial and economy systems. The Central Bank in warned that the nation needed to brace for ‘adverse turn of events’ in August 2011.
At that time, Monetary Authority of Singapore managing director, Revi Menon said that any deterioration of the euro zone, which was the biggest export market, would hurt the economy and also lead to dry up of bank credit.
When the euro crisis broke out, the euro zone governments made the necessary steps that were needed to reverse the state of things. However, the government of Singapore warned its citizens to prepare for adverse turn of events. Some of the immediate effects that were as a result of the crisis included the following:
- A shadow in financial markets after Spanish borrowing prices hit a high in the midst of fears Madrid would be in need of a fully blown out bailout.
- Singapore experienced a dry up of credit account as was the case in the aftermath of the United States bank Lehman Brothers which happened in 2008 leaving global markets completely hammered.
- Retraction of euro zone banks trade activities not only in Asia but in global and local banks as well that stepped in to fill the void.
- As an international financial center, Singapore braced itself for excessive outflows and inflows of capital and this impacted the Singapore dollar.
The EU is known as the largest trade partner for Singapore and as such, slowdown in trade with the region means that the recession spectre will only rise higher. The markets are therefore expected to pay special attention to the markets. The manufacturing industry in the country makes a quarter of the GDP which is the measure of value of the state of economy in the city.
Revi Menon, in 2012 August however said that the state of economy in Singapore was on the right track and that the financial system was sound. However, he also warned that people should prepare themselves to brace any storm they might be exposed to. Between 2013 and 2012, the economy was 1.0 and 3.0 % from a 4.9% that was recorded a year earlier.
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