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DBS Bank chief executive Piyush Gupta remains cautiously optimistic about the Singapore economy despite the euro zone crisis and the slow United States recovery.
Mr Gupta stands by his view that growth will come in at about 3 per cent this year - the top end of the official forecast of about 1 per cent to 3 per cent.
'The first quarter was stronger than anticipated. The maths tells you that we will be in the top half of the forecast,' he said at a lunch for private bank clients yesterday.
'But there will be headwinds from around the world. The uncertainty around Europe and the slowdown in the US will be challenging.'
The economy expanded by 1.6 per cent in the first quarter compared with the same period a year ago, exceeding expert expectations.
Mr Gupta told investors to expect more market volatility in the months ahead as the structural problems in the developed economies are unlikely to be resolved soon.
He also said that the 'new sense of optimism' felt in the US economy in the first quarter could have been due to pent-up auto demand as the Japanese earthquake and tsunami last year disrupted supply chains.
'Real demand in the US is petering out, and all the other GDP (gross domestic product) indicators are also beginning to level out,' Mr Gupta added.
'Therefore the likelihood of a quantitative easing in the next few weeks is actually quite high. (Ben) Bernanke and the Fed are pushed to do another round.'
If the US rolls out another round of quantitative easing, the flow of money into Asia may mean even greater fluctuations in regional currencies and interest rates, Mr Gupta noted.
He added that Asian economies are a lot more robust and have greater policy flexibility in managing their economies. 'All the central banks tried to engineer a slowdown and they succeeded. It is possible the Chinese economy slowed down a little faster than... intended, and the Chinese government was quick to react.
'Now, it is tipping over to the other side to make sure that growth is not compromised.'
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