* Economic situation dire, recovery likely slow and uneven -
* MAS in discussion with banks over capital management
* Fund flows from Hong Kong not large
SINGAPORE, July 16 (Reuters) - Singapore's financial system
remains robust and resilient even as the economy suffers its
most severe downturn due to the coronavirus pandemic, central
bank chief Ravi Menon said on Thursday.
The trade-reliant economy plunged into recession in the
second quarter after contracting by a record 41.2%, data showed
There was substantial uncertainty over the global economic
outlook, the Monetary Authority of Singapore's (MAS) managing
director told a news conference after the central bank's annual
report was released.
"The economic situation remains dire. The recovery is likely
to be slow and uneven, weighed down by renewed outbreaks of
infection here or abroad," he said.
The MAS maintained its GDP forecast in the range of -4% to
-7% for 2020, keeping Singapore on track for its biggest slump.
Menon said roughly 12% of Singapore's economy - including
construction and travel-related sectors - was at the "epicentre"
of the impact of COVID-19.
The MAS eased monetary policy in March, while the government
has pumped in nearly S$100 billion ($72 billion) worth of
stimulus and emergency relief measures to blunt the impact of
Menon said the MAS was in active discussions with Singapore
banks over their capital management measures, which would
include whether or not to restrict dividend payments.
He also said the MAS hoped to make an announcement around
October about gradual repayment of relief measures by businesses
and individuals. "We want to avoid cliff effects" from a sudden
withdrawal of that support.
Singapore has rolled out measures such as deferment of loan
repayments and insurance premiums for firms and individuals.
Responding to a question on whether Singapore was seeing
asset inflows due to the political uncertainty in Hong Kong,
Menon reiterated this was not significant.
"We've seen increased flows into Singapore from a variety of
sources, and that includes Hong Kong, but the amounts are not
large," he said.
"There are more enquiries, as you would expect when there is
greater uncertainty in Hong Kong. Flow of activity of businesses
also is not significant," Menon said.
China imposed a sweeping new security law in Hong Kong this
month, adding to worries over the risk of a flight of capital
and talent as Beijing tightens its grip on the financial hub.
(Editing by Kim Coghill and Jacqueline Wong)