TAIPEI (Reuters) - The recovery in the global economy could be surprisingly strong in the coming quarters, helped by emerging markets, the deputy chairman of Government of Singapore Investment Corp said on Monday.
The global economy is also likely to become more reliant on government policies such as liquidity support and asset purchases, Tony Tan told a forum in Taipei, noting that any withdrawal of such policies could derail the recovery if it is done too early or too sharply.
“The global recovery has generally been stronger than most analysts’ expectations and could further surprise on the upside, at least for the next few quarters,” Tan said.
He added that developed economies may also see growth, with the United States likely to see moderately strong growth in the first half of this year before slowing, while Europe is likely to benefit from the pickup in global trade.
“The good news is that we appear to have avoided a global depression,” Tan said. “The global economy has stabilized and is now recovering.”
However, he warned that policy makers in emerging markets will have to contend with rising inflation and likely asset price bubbles, challenging governments who have to keep prices in check while not snuffing out the nascent recovery.
“Across the region, we have seen significant rises in equity and real estate prices on the back of domestic reflationary policies and capital inflows supported by low global interest rates,” he said.
“These have not in general hit their previous peak, and can be justified by positive fundamentals, but continued low interest rates could push prices higher, and eventually lead to bubbles.”
GIC, one of the world’s largest wealth funds, with assets estimated in excess of $200 billion, holds stakes in financial firms such as UBS and Citigroup.
Reporting by Kelvin Soh; Editing by Ken Wills