Sin­ga­pore out­look sta­ble

The Pak Banker - - COMPANIES/BOSS -

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.

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