SINGAPORE, July 25 (Xinhua) -- Singapore's central bank chief said on Wednesday that he saw an overall scenario of soft landing for the Chinese economy, citing the strong labor market and wage growth as one of the factors underpinning private consumption.
Speaking at a press conference for the annual report of the Monetary Authority of Singapore, Managing Director Ravi Menon said he expected the Chinese economy to grow by at least 7.5 percent this year.
"I think most people would define anything below 7 percent or 6. 5 percent as a hard landing. That's not our baseline view," he said.
China's economic growth was 7.6 percent in the second quarter this year, the first time it dipped below 8 percent in more than two years, causing concerns among some of the economists.
"There has been some weakness in the last quarter. But the labor market remains strong, the wage growth in China remains strong, that I think will underpin private consumption," he added.
Menon said the monetary policies have been eased in China and the government still has room for more support measures, which are not needed now.
IMPACTS OF SLOWDOWN IN ADVANCED ECONOMIES
The Monetary Authority of Singapore maintained its growth forecast of 1-3 percent for the Singapore economy, saying that it has factored in the expected recent slowdown in the global economic growth.
The Singapore economy grew by 4.2 percent in the first half, but the growth momentum is "clearly slowing." It recorded a quarter-on-quarter contraction of 1.1 percent in the second quarter this year.
The domestic demand in Asia is holding up but the growth is vulnerable to developments in the advanced economies, as the full extent of weakness in exports and its effects through regional production and trade linkages, "has probably not filtered through completely," Menon said.
The growth forecast for Singapore was based on the assumptions that there will be no recession in the United States, no significant escalation of eurozone crisis and no "hard landing" in China.
"If one or more these assumptions do not pan out, Singapore's GDP (gross domestic product) growth could dip below 1 percent for 2012," he said.
Menon said that the world economy is still in the midst of a long drawn-out process of deleveraging, and that every previous financial crisis that came at the end of a period of leverage buildup resulted in a period of weakness that is much longer than the usual normal recessions.
"The key driving force at least for the medium term, I mean the next two to five years, will be deleveraging," he said.
Nevertheless, he said that this does not mean there will be no growth. It's just that the growth is lower. There will always be part of the world, by geography or by industrial sector, to see rapid growth, too.
The central bank narrowed its forecast headline inflation range to 4-4.5 percent from 3.5-4.5 percent previously, and the core inflation forecast remained unchanged at 2.5-3 percent.
The headline inflation is expected to be more sticky than the core inflation, which excludes costs of accommodation and private road transport. The imputed house rentals and the cost for owning cars have been rising significantly in Singapore over the past year. The Monetary Authority said bringing down inflation remained one of its top priorities.
The Monetary Authority also said it is monitoring the economic situation and preparing for the risks to economic and financial stability posed by the escalation of the eurozone crisis.
"We monitor the risks closely, take steps to mitigate these risks where we can, and draw up contingency plans to manage them if they materialize," Menon said.
The authority said in its annual report on Wednesday that it had agreed on Feb. 9 to provide the Singapore Deposit Insurance Corp. Ltd with a contingent liquidity facility of up to 20 billion Singapore dollars (15.9 billion U.S. dollars) in the event a deposit insurance scheme member fails and liquidity is needed for compensation payments to insured depositors.
Singapore is one of the central banks that took measures to guarantee all bank deposits during the financial crisis in 2008.