IMF praises S’pore for managing capital inflows

Dear Straits Times,

I refer to the 26 Oct 2010 Straits Times report of the IMF press statements made in Singapore on 25 Oct 2010 (Press Release No. 10/397, “IMF Sees Singapore Reflecting Regional Trends: A Strong Rebound but with Challenges Rising”).

The IMF did not particularly praise Singapore. In the same press statement, IMF said:
“We welcome the steps so far taken by policymakers (of many countries in the region) to address inflation risks and limit the build-up of financial vulnerabilities.”
“Developments in Singapore closely follow and highlight these regional trends and challenges.”
Thus, the measures taken by Singapore are nothing out of the extraordinary compared to those taken by other countries in the region and the IMF praise extends to these countries as well.

The statement “the authorities have rightly introduced macroprudential and other measures to forestall excessive exuberance and meet the growing demand for housing.” should not be viewed as Singapore being singled out for praise by the IMF. This is because four days earlier in Jarkarta, the IMF said:

“We have seen a growing number of countries in Asia taking macro-prudential measures to help deal with these capital flows as one of several policies to manage the inflows.”

Thus, macroprudential measures have been rightly introduced not only in Singapore but in a growing number of countries in Asia as well.

Furthermore, government measures to curb property speculation and to boost housing supply came three years late by which time property prices have already shot up by more than 50%. If any praise should be given, it should be given to those citizens who been clamouring without success for the government to take action for the past three years.

DBS Bank’s Irvin Seah exudes frivolity and nonchalance in echoing the government’s view that speculation is mainly caused by locals. Whether by locals or by foreigners, how can speculation be possible without the rapid increase in property prices fueled by a fundamental mismatch in supply and demand for housing?

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