Investments: Financial crisis set to last
Global recession to be 'longer, deeper and wider' than 1970s
Monday, 21 Apr 2008 12:36
The world faces the threat of recession lasting longer and being deeper than that of the 1970s.
The deputy chairman of one of Singapore's sovereign wealth funds explained to staff at the weekend the US crisis has now spread the world – increasing the chance of a global crisis.
Tony Tan, of the Government of Singapore Investment Corp, also explained recent investments in UBS and Citigroup – worth $11 billion (£5.5 billion) and $6.88 billion (£3.5 billion) respectively – would be long-term investments.
"We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years.
"The financial contagion has now spread beyond US shores, increasing the likelihood of a global financial crisis and recession," said Mr Tan.
He added the current volatility, fueled by the credit crunch, was set to continue in coming years.
"What is clear is that the financial and investment markets will be extremely nervous and volatile over the next one to two years," Mr Tan said.
"We regard our investments in UBS and Citigroup as long-term investments which will give us good returns when markets stabilize and economic conditions return to more normal levels."
Mr Tan called on US authorities to take action to stabilise its property market in the coming quarter, or stabilisation could be left to market forces.
"This will be a considerably more painful and long-drawn process," he said.
"What is clear is that the financial and investment markets will be extremely nervous and volatile over the next one to two years."
The chancellor Alistair Darling is set to unveil plans today to stem the growth of the credit crunch – with the Bank of England offering £50 billion worth of government bonds in exchange from mortgage-backed securities for banks to use as security in the money markets.