Bangkok--30 Aug--Standard & Poor's
Robust public finances, a solid net external creditor position, strong track record of political stability and prudent macroeconomic management underpin the ratings, while some vulnerability to exogenous shocks remains.
We affirm the 'AAA/A-1+' sovereign credit ratings on Singapore.
The outlook remains stable on our expectation that the sizeable external and fiscal reserves would be maintained.
Standard & Poor's Ratings Services today affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the Republic of Singapore. The outlook remains stable. The transfer and convertibility (T&C) assessment remains at 'AAA'.
At the same time, we affirmed the long-term ASEAN scale credit rating on Singapore at 'axAAA', and the short-term ASEAN scale credit rating at 'axA-1+'.
The ratings on Singapore are underpinned by the sovereign's extensive fiscal and external strengths, and its solid record of prudent macroeconomic management. At the same time, the ratings take into account the challenges the country faces as a small and open economy.
"In our view, Singapore's high level of general government surplus provides strong fiscal flexibility against potential economic and fiscal shocks," said Standard & Poor's credit analyst Yee Farn Phua.
The government's considerable external and fiscal reserves enabled it to introduce a bumper stimulus package in early 2009 to cushion the fallout from the global economic crisis. The stimulus measures, totaling Singapore dollar (S$) 20.5 billion (8% of GDP), focused on job retention and freeing up credit. The swift fiscal response saw the economy contracting at a much lower rate than initially feared, and unemployment only rose marginally throughout the crisis.
The strong fiscal flexibility also affords the sovereign the resources to implement much needed structural reforms of the economy. Although real GDP growth had averaged 5% over the past five years, on a per capita basis, it measured an anemic 1.3%, suggesting the large inflow of labor, rather than an increase in real productivity of workers, had augmented growth.
The sovereign's net external position remains solid, underpinned by the virtual absence of external public sector debt, Mr. Phua said. Liquid external assets exceed external debt by an estimated 132% of current account receipts in 2010. This reflects a combination of fiscal prudence and continued high current account surpluses, which averaged 21.7% of GDP between 2005 and 2009.
The ratings on Singapore are also supported by the country's political stability. The government's policymaking approach has consistently been pragmatic and forward-looking. Its policy responses have also been swift and appropriate for countering economic challenges thus far.
Given its small and open economy, however, Singapore is more exposed to exogenous shocks than some of its peers. Its economy contracted 1.3% in 2009 during the global trade downturn. Singapore does not have significant room to shift its focus to more domestic-oriented growth, unlike some of its bigger neighboring countries. However, this limitation is partly mitigated by the government's fiscal flexibility to deal with cyclical shocks and the continued efforts in structural reforms to ensure the economy remains competitive.
"Nonetheless, the nature of Singapore's economy also suggests that it could ride an upswing in global demand faster than most other countries. The economy grew a remarkable 17.9% in the first half of 2010 and we forecast full-year real GDP growth at 13.5%--possibly the highest globally in 2010," Mr. Phua said.
RELATED CRITERIA AND RESEARCH
Sovereign Credit Ratings: A Primer, published May 29, 2008.
Complete ratings information is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
David Wargin, New York (1) 212.438.1579,
[email protected]
Analyst Contacts:
YeeFarn Phua, Singapore (65) 6239-6341
Agost Benard, Singapore (65) 6239-6347