Singapore outlook stable
Global rating agency Fitch has affirmed Singapore's Long- Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'AAA'. The Outlooks on the ratings are Stable. The agency has also affirmed the Country Ceiling at ' AAA' and the Short-Term Foreign-Currency IDR at ' F1+'.
The affirmation of Singapore's sovereign ratings reflects the following factors: The ' AAA' ratings are underpinned by Singapore's strong sovereign balance sheet that serves to insulate the small and open economy from external shocks. Sustained fiscal surpluses have enabled the accumulation of fiscal reserves of at least 61.3% of GDP at endMarch 2012. Singapore also possesses large external buffers with official international reserves reaching USD259.3bn, equivalent to 5.4 months of current external payments and 65.2% of broad money supply, at end-2012.
External finances are a rating strength. The sovereign's large current account surplus has been a main driver for sustained accumulation of foreign-exchange reserves. The country is one of the largest net external creditors (in sov- ereign, bank and non- bank sectors) among ' AAA' peers. Its net international investment position (NIIP) reached 276% of GDP in 2011, the highest among ' AAA' sovereigns. Singapore has a solid track record of fiscal prudence. The country's fiscal framework is underpinned by the government's commitment to balance its budget over the course of a term.
There is limited disclosure on the balance sheet of the government's sovereign wealth funds, but the ratings rest solely on publicly available information, which understate the sovereign's fiscal strength. In the long run, age-related spending is projected to increase due to ageing demographics, but this is currently not a rating driver. Singapore's ratings are supported by strong economic performance, which is underpinned by an attractive investment environment, a low tax regime and high-quality public institutions. These factors have contributed to large inflows of foreign direct investment (FDI) and helped create a high-income economy. However, as a small open economy, Singapore's economic growth is more volatile than the ' AAA' range median and is more exposed to global economic cycles.