Given the highly infectious nature COVID-19, renewed outbreaks and secondary waves of infection is almost inevitable, said the MAS chief in an interview on the impact of COVID-19 in Singapore, the associated risks, and policy responses.
«I think the market expectation that there's going to be a recovery in the second half of this year and then we'll all gradually get out of this over the course of 2021 is going to be severely tested,» Ravi Menon, MAS managing director, told Tim Adams, president and CEO, Institute of International Finance on the latest installment of podcast «The Big Questions,» broadcast on Thursday.
«There's a mismatch between market expectations and how the economies are likely to come out of this, because there are going to be setbacks,» Menon said.
Debt Build-Up
Menon said that the accumulation of debt is likely to be the most pressing aftermath of the Covid-19 pandemic, and one of its effects is the risk of renewed capital outflows from emerging market economies as a result of a renewed rush into liquid and safe assets.
«That's never a good scenario for emerging markets - tighter financial conditions and corporate refinancing risks,» Menon said.
Credit Risks
Other risks cited include the growing amounts of corporate debt and mounting credit risks, as well as increased deterioration in credit quality.
«So corporate downgrades is something we're looking at carefully, which is why I think it's important that emergency measures that all governments and central banks have taken cannot be carried on for too long. We need an exit strategy before this debt accumulates to a point where we have to deal with it for years after,» he said.
