Ravi Menon
Ravi Menon, the managing director of Monetary Authority of Singapore. Reuters

Singapore central bank Managing Director Ravi Menon on Monday outlined risks to the global economy that investors should watch out for this year.

Menon used the analogy of the fable 'Goldilocks and the Three Bears' to warn of possible risks.

"My "papa bear" is inflation; "mama bear" protectionism; and "baby bear" financial instability," Menon told delegates at the UBS Wealth Insights Conference in Singapore.

While he was optimistic about the outlook, Menon said the "three grumpy bears" threaten to derail the positive momentum.

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Menon expects China to see a moderation in growth this year but "not cool off sharply".

"The government is expected to rein in local government spending, tighten curbs on residential property purchases, and seek to reduce excess industrial capacity. But the slowdown is likely to be measured and the risk of a "hard landing" has narrowed," he said.

In the U.S., financial stresses are most apparent in the credit markets, Menon said.

Corporate debt has increased by 30 percent since the crisis, and much of the funds raised has gone into stock buybacks or to highly leveraged corporates.

Despite these worrying signals, sustainable economic growth is expected to be at 2 percent to 4 percent, Menon told delegates at the UBS.