SINGAPORE, May 9 (Reuters) - Singapore’s sovereign fund GIC, one of the world’s biggest state-owned investors, warned on Friday that risks to the global economy could rise in the next 12 months due to falling house prices and a spike in energy costs.
The comments by Government of Singapore Investment Corp Deputy Chairman Tony Tan come after he cautioned last month that financial markets would remain fickle and the world could face its worst recession in 30 years — a scenario that was widely perceived as being too gloomy.
“Steep falls in house prices in the U.S. could deepen mortgage-related losses and dampen consumer spending,” Tan said, according to the text of a speech delivered in Shanghai.
“Higher energy costs could potentially offset the positive impact of tax rebates U.S. households receive from the fiscal stimulus package,” he said.
Tan acknowledged that market uncertainty and volatility had made it harder for investors to achieve strong returns, while taking acceptable risks.
GIC, estimated to have more than $300 billion in assets, is heavily exposed to the financial industry through its multi-billion dollar investments in beleaguered banks UBS UBSN.VX and Citigroup (C.N) made in the wake of the credit crisis.
GIC said last month it was confident that the bank investment would give good long-term returns. Its sister fund, Temasek Holdings [TEM.UL], has invested in Merrill Lynch MER.N and Barclays (BARC.L). (Reporting by Jan Dahinten; Editing by Anshuman Daga)