The world has entered an era of profound uncertainty and fragility, Senior Minister Tharman Shanmugaratnam said.
Speaking at the IMAS-Bloomberg Investment Conference on 9 March 2022, Mr Tharman, who is also MAS Chairman, said investing for the future has become a much more complex game, more complex than it was pre-pandemic, and also more complex than it was two weeks ago.
He described the combination of risks and fragilities faced as ‘without precedent in the last three-quarters of a century’.
“I would describe it as a ‘perfect long storm’, shaped by the confluence of several forces,” he said.
A period of heightened and likely prolonged geopolitical insecurity
The risk of stagflation
Describing inflation as not a trivial problem, Mr Tharman said the risk of stagflation is real.
A 5-6% inflation can be a very demoralising experience because a large part of the populations in the world are now older, and middle aged workers tend to have wages that tend to stay flat, while a large part of the retiree population is on fixed nominal incomes.
This will complicate the task of governments to rally support for the types of initiatives, the taxes, the carbon pricing that is required to address the larger challenges we face which includes the climate crisis.
Adding to this is pandemic insecurity. COVID-19 will not be the last pandemic we’re going to see.
“We are in an age of recurring pandemics. To prepare for them, we have to mainstream preparedness the way we are beginning to mainstream preparedness for climate change,” Mr Tharman said. “The world is still far from doing so,” he added.
The prospect of higher food, fertiliser and other commodity prices are accentuated by the war in Ukraine. A global food crisis will hit poorer countries hard.
These risks and sources of fragility together define a ‘perfect long storm’.
"I say long storm, because this is not just a perfect storm in the traditional sense where you have a confluence of one-off, conjunctural factors. These are structural shifts. They're not cyclical or random shocks. They're structural shifts, interacting with each other, that are going to be with us for some time. "It makes for a new era of fragility, at the same time that we see opportunity – the tremendous scope for innovation that's on the horizon, and the opportunity to unleash investments in the global commons through new public-private sector collaborations. "But we can't wish away the structural fragilities. We can't operate on the basis of forecasts or scenarios that reflect our hopes, as distinct from what is possible. Ukraine is a reminder of that. The risks were ignored or downplayed, despite ample evidence. The Covid pandemic too is a reminder of that. The risks were all over the screen, and they were ignored. "So we have to prepare for the future, not on the basis of what we hope to see, but what is possible. That's how we must prepare for the future."
