Global shocks demand financial governance reform
Monetary Authority of Singapore Managing Director Chia Der Jiun called for greater resilience, expanded regional cooperation, and stronger international institutions to navigate frequent global shocks. Speaking at the Lujiazui Forum, he highlighted persistent uncertainty and building risks to financial stability.
A decade of relentless shocks
The global economy has faced five major demand and supply shocks in the past six years, including the COVID pandemic, the war in Ukraine, a 2025 tariff shock, accelerating AI investments from 2024, and an unprecedented energy supply shock this year.
These events triggered substantial volatility, marked by deep economic contraction in 2020 and global inflation peaking at 8.8% in 2022.
Despite this, the global economy demonstrated a measure of resilience and agility.
Economic growth recovered strongly from 2023, and inflation moved closer to target by 2024.
Global trade continued to expand in 2025, even with the tariff shock, particularly in Southeast Asia.
Notably, no major financial shock occurred, with localized issues contained quickly.
Fiscal strains and AI dependencies
However, this resilience is not to be taken for granted as risks are building up.
Fiscal space for policy response is lower due to persistent deficits and higher debt, with many major advanced economies now having debt-to-GDP ratios higher than 100% and average fiscal deficits above 5%.
Debt markets are more vulnerable to inflationary pressures and unsustainable fiscal policies.
Global economic growth and equity market valuations are highly reliant on AI, which could slow sharply or reverse if investment assumptions are reassessed, given the uncertain returns and climbing costs of energy and chips.
The durability of the Strait of Hormuz agreement is also uncertain, potentially causing greater energy shock effects in the second half of this year as inventories run down.
Cooperation's uphill battle
Chia Der Jiun clearly articulates the escalating risks and the necessary policy responses, emphasizing cooperation.
However, the speech implicitly acknowledges the significant geopolitical headwinds that could undermine these crucial collaborative efforts.
While the blueprint for stability is clear, its execution remains highly uncertain.