Gauging growth risk in an international financial centre: some evidence from Singapore

This paper applies the growth-at-risk framework proposed by Adrian et al. (2019) to Singapore, an international financial centre whereby financial shocks are intermediated away quickly. We gauge near-term risks around growth projections taken from the survey of professional forecasters by accounting for financial stress in both local and global financial markets, as well as worldwide economic uncertainty. The conditioning variables are first linked to future growth through quantile regressions, and the estimated quantiles are fitted with skew t-distributions to produce full predictive distributions. Scenario analysis reveals that greater local financial strain tends to widen the uncertainty of growth outlook, higher global financial stress portends more severe recessions, while increased uncertainty in the economic policy environment dampens the intensity of economic booms. We also document higher average log predictive scores for conditional distributions compared to unconditional ones when projecting one and two quarters ahead. Our empirical results underscore the importance of incorporating the influence of foreign vulnerabilities in addition to domestic ones to assess short-term growth risk in an international financial centre like Singapore.