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Fitch: Singapore's AAA rating not in doubt

The Singapore skyline photographed from Marina Bay Sands on 16 February 2015.


CREDIT rating agency Fitch Ratings said on Monday that Singapore's top-notch AAA credit rating is not in doubt, though there are longer-term pressures the country shares with other advanced economies.

These include slow productivity growth, income inequality, and an ageing population, Andrew Colquhoun, head of Asia Pacific sovereigns at Fitch Ratings, told The Business Times in a phone interview.

The 2015 general election results show how the PAP remains in control of the process of changing Singapore's economic and social models to adapt to a different world, Mr Colquhoun said.

"The election results will confirm investors' view that the PAP has the latitude, flexibility or creativity to continue to steer that process," he said.

Referring to efforts to boost productivity, he said the Government's strategy and intentions are clear, though there are no quick fixes.

And while Singapore has increased welfare spending in recent years, the spending is "well short of what would have a material impact on the rating".

"Singapore is certainly living well within its means," he said.

Fitch reviews Singapore's ratings once a year. The next review is in December. Mr Colquhoun said he "does not see Singapore's AAA-rating as under pressure over a three- to five-year period, which is the outlook that we would have, or probably even beyond that."

This is due to the strength of its finances and the quality of its public institutions, he said.

Opposition politicians have argued in election rallies that the dominance of the ruling People's Action Party (PAP) - which now controls 83 out of 89 seats - could lead to potential instability in the future.

But it is "not for us as a rating agency to opine on the arrangement of parties and so on", Mr Colquhoun said.

The agency examines broader governance measures, he said. This includes how effective a country's public institutions are, and how efficiently a government distributes resources and promotes growth.

"If you look at Singapore, it is routinely in the top spot in the ease of doing business. Its public institutions are among the world's strongest. Governance tends to be a strength for Singapore," he said.

Looking ahead, countries like Singapore that have benefited from globalisation seem to be heading into a world where the impetus for globalisation is fading, he said.

Global trade growth is weak, there are income inequality issues, and China's economic slowdown has global ramifications, he said.

"The AAA rating should be robust to normal fluctuations in the cycle, then we think about what might happen structurally in the longer term," Mr Colquhoun said. "China is going through pressures, but its weight in the global economy will continue to rise. (Singapore) being exposed to that, the growth story is slower than previously thought but is still going to be structurally positive."