According to Bloomberg:
April 21 (Bloomberg) — Government of Singapore Investment Corp., the sovereign fund that has invested about $18 billion in UBS AG and Citigroup Inc. since December, said the world economy may be headed for its worst recession in three decades.“We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years,” Tony Tan, deputy chairman of GIC, as the company is known, said in a speech to more than 500 employees in Singapore today.
Tan said GIC, which oversees more than $100 billion, faces its “most challenging years” since being founded 27 years ago, as the global supply of credit contracts. His remarks come as the fund considers investing more in UBS, which is reeling from $38 billion of writedowns.
The banking industry will probably be the worst affected by a global recession, said Guy de Blonay, a director at New Star Asset Management Ltd. in London, which manages $1.2 billion in financial stocks.
“You cannot rule out the possibility of an operating environment for banks taking a sharp turn for the worse,” he said. “Indeed, history suggests that a deep banking crisis is not over until the sector has been subject to broad re- capitalization and management shake-ups.”
The International Monetary Fund this month changed its forecast for global economic growth to 3.7 percent for 2008 from an earlier projection of 4.1 percent. It also said there’s a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.
`Extreme Uncertainty’
The reduction was the third by the Washington-based lender since July, when it predicted the world economy would cope with the U.S. credit squeeze and grow 5.2 percent this year.
GIC, set up in 1981 as the government’s fund manager for Singapore’s foreign reserves, has earned an annual average 9.5 percent since its inception, it said two years ago at its 25th anniversary.
Tan, 68, told his employees that they’re entering a period of “extreme uncertainty” in the world economy and global financial markets.
“The next years may well be among the most challenging years for GIC since our establishment,” Tan said. “As banks continue to deleverage, cutting down on their lending activities and causing contraction in credit supply, the prospects for the U.S. economy and possibly even the world economy are fraught with considerable downside risks.”
Citigroup, UBS
Citigroup, the biggest U.S. bank, and UBS are two of the hardest-hit companies by the collapse of the subprime mortgage market. Citigroup on April 18 posted a $5.11 billion first- quarter loss on almost $16 billion of trading writedowns and increased bad loan reserves, and cut 9,000 jobs.
UBS on April 1 said it will seek 15 billion francs ($15 billion) on top of the $13 billion it already raised from GIC and an unidentified Middle Eastern investor. GIC owns rights to acquire stock with 9.5 percent of its voting rights.
GIC said this month it will examine the terms of UBS’s rights offer before deciding on whether to participate. The dilution to shareholders and those holding UBS’s mandatory convertible notes from the rights offer is a “necessary step,” GIC said at the time.
Tan today defended funding Citigroup and UBS, saying the investment is “long term” that will yield returns when markets stabilize.
GIC, which doesn’t publish financial statements, aims to achieve a rate of return exceeding the average inflation rate in the U.S., Japan and Germany, according to its Web site. Its average rate of return over global inflation was 5.3 percent per annum since 1981, the fund said two years ago.
-This is not a surprise coming from our Government as me and my friends who believe in peak oil knows all along. Is it time you invested in your own sustainable environment?
Thanks Lowem for this article tip off 
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