World May Face Deepest Recession In 30 years

Source : The Straits Times, Apr 21, 2008

GIC's deputy chairman Tony Tan warns of its biggest challenge yet

THE world could be facing its worst recession in three decades but governments can lessen the effects of the downturn if they act decisively within the next three to four months.

The warning came from the deputy chairman of the Government of Singapore Investment Corp (GIC), Dr Tony Tan, who urged policymakers to take strong action to stabilise investment markets and sentiment amid the extreme uncertainty surrounding the global economy.

'We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years,' he said on Monday.

'The next few years may well be among the most challenging years for GIC since our establishment in 1981.'

As for GIC's recent investments into global banks UBS and Citigroup, Dr Tan said these long-term investments will 'give us good returns when markets stabilise and economic conditions return to more normal levels'.

The world economy and its financial markets are in turmoil, sparked off by a mortgage crisis in the United States that is still unfolding.

The crisis of confidence has led central banks, especially the US Federal Reserve, to intervene in unprecedented ways to avert a seizure in the world's banking system.

Dr Tan told about 500 staff at GIC's first annual staff conference: 'The prospects for the US economy and possibly even the world economy are fraught with considerable downside risks.'

He warned that financial markets will be 'extremely nervous and volatile over the next one to two years'.

But the pain can be reduced and shortened if policymakers around the world act swiftly, he said. If so, 'investment markets and sentiments can turn around sharply'.

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GIC warns of 'longer, deeper, wider' recession

Singapore Government Investment Corporation or GIC has pointed to a likely global financial crisis and recession this year.

Speaking at a staff meeting, GIC Deputy Chairman Tony Tan said however that the GIC is well prepared as it had moved to a more conservative posture in its portfolio by liquidating a portion of its equity holdings.

This provided the investment giant with the liquidity to take a substantial stake in global banks UBS and Citigroup.

Dr Tan pointed out that these investments are long term ones which will give the GIC good returns when the markets stabilise and economic conditions return to more normal levels.

Read the full report in Tuesday's edition of The Straits Times