SINGAPORE'S Aaa rating reflects the city-state's very high per capita income levels, economic competitiveness, strong fiscal metrics and robust institutions. Moody's Investors Service said in its latest credit analysis on the Singapore government.
In the annual credit analysis, the credit rating agency said that Singapore's fiscal buffers are strong, owing in part to prudent fiscal rules that require a balanced budget over each term of government. It added that while government debt levels are modest, debt in the corporate sector has climbed higher, and could present risks for the banking system as global interest rates tighten, and given currency movements.
"The stable outlook reflects the government's very strong credit fundamentals," Moody's said, adding that it took into consideration four rating factors in its rating determination: economic strength, institutional strength, fiscal strength and susceptibility to event risk.
However, it warned that the rating could come under downward pressure should ongoing restructuring efforts fail to keep growth from decelerating further to levels below those consistent with Aaa peers over the medium term, or if the government's fiscal position weakened materially either because of lower growth or a shift in fiscal policy.
"While events or trends that jeopardised Singapore's status as an international financial centre are unlikely in our view, if they occurred they would also suggest downward pressure on the rating," it explained.
With nominal gross domestic product (GDP) at close to US$300 billion as at 2015, Singapore ranked 37th out of all Moody's-rated sovereigns in terms of size. The IMF (International Monetary Fund) estimates its 2015 per-capita income at over US$85,000 on a purchasing power parity basis. Singapore is among the most trade dependent economies in the world; openness of the economy - as measured by the exports and imports of goods and services as a share of GDP - is the third-highest in Moody's rated universe, trailing only Hong Kong (Aa1 Negative) and Luxembourg (Aaa Stable).