According to the chairman of Singapore's central bank, the globe is approaching a macroeconomic era of medium-term supply shortages that would require additional significant expenditures.
"We have to accept that we are not dealing with immediate shocks in demand or supply," Tharman Shanmugaratnam, head of the Singapore Monetary Authority, said Friday at a Boao Forum for Asia event. "However, we are confronted with a fundamentally altered macroeconomic environment on a worldwide scale."
For many nations, the recovery from the epidemic has been complicated by increasing inflation, fueled by pent-up demand, pricier commodities, and stubborn supply chain bottlenecks.
Strong consumer price increases, the fastest since the early 1980s in the United States, are requiring policymakers to strike a balance between managing inflation and tipping countries into recession.
Tharman, who is also Singapore's senior minister and a prominent voice on global economics, was speaking on a virtual panel alongside speakers from China and Thailand about the problem of inflation and increased interest rates.
Along with short-term supply and demand concerns, Tharman noted that the fundamental hallmark of this new period is one of medium-term aggregate supply shortfalls, a cost of decades of underinvestment in supply capacity.
He stated that substantial investments are required in transitional and renewable energy, connectivity, water resources, as well as human capital and education.
In the medium term, resolving supply-side issues will need a "new global bargain," which will include mobilizing and "de-risking" private capital to invest in developing economies, as well as hiking taxes in both advanced and emerging economies.
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