b1110
Challenges for the Singapore Economy
Figures 4 and 5 graph the level of domestic credit to the private
sector and its growth over time. Credit growth reached a peak in May
2008 and declined thereafter. Despite the fact that the cost of bor-
rowing was falling to low levels, making it cheaper to borrow, the
demand for domestic credit in Singapore tends to be more responsive
to the overall level of activity in the economy.
83
The financial impact
of the crisis on Singapore was thus cushioned by the fact that the fall
in domestic non-bank loan growth, which occurred alongside the
contraction in overall GDP, was less severe than during the Asian
financial crisis of 1997 and the 2001 downturn, due to strong
demand for credit in the building and construction industry and from
the residential housing sector.
84
As Figure 5 shows, total and business
loan growth from the previous year did fall between Q4 2008 and Q3
2009 but consumer loan growth was quite resilient.
Monetary Policy in Singapore and the Global Financial Crisis
151
2007
2008
2009
2010
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
DLI Change from 3
Months Ago
Cumulative DLI
Figure 3:
The Singapore domestic liquidity indicator 2007–2010.
Source
: Monetary Authority of Singapore financial database, mas.gov.sg.
83
See Monetary Authority of Singapore (2009).
84
Based on Monetary Authority of Singapore (2009) estimates, the peak-to-trough
decline in domestic banking units’ non-bank loans was 0.8% between the third quar-
ter of 2008 and the first quarter of 2009 compared to a 4.0% fall during the previous
two recessions.
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