Monday, Sep 05, 2022
MARC Ratings
has affirmed its foreign currency sovereign rating of AAA/stable on the
Republic of Singapore (Singapore) based on its national sovereign rating scale.
The AAA rating reflects a number of Singapore’s strengths, including having a
dynamic and competitive economy underpinned by strong economic policy
frameworks and effective institutions.
Singapore’s
success as a global business and financial hub has been and continues to be
underpinned by sound economic management, as well as credible governance and institutions.
Thanks to, among other things, extensive policy support, swift vaccination
rollout and strengthening external demand, the economy has staged an impressive
rebound from a pandemic-induced recession. Real GDP, which had contracted by
4.1% in 2020, surged by 7.6% in 2021. Its recovery was one of the strongest
among the advanced economies.
The
rating also takes into account strong fiscal discipline, as reflected by the
government consistently recording more fiscal surpluses than deficits. As a result,
the government continues to enjoy ample fiscal policy space. In addition, its
external position remains robust, as evidenced by strong current account (CA)
surpluses (2021: 18.1% of GDP; 2020: 16.8%). Consequently, the city-state has
managed to accumulate a massive stock of foreign exchange reserves (2021: USD417.9
billion).
Given
that the economy is small and open, and therefore exposed to external
developments and shocks, growth volatility is high. However, on balance, we do
not expect it to greatly affect its macro-financial stability, given its robust
external balance sheet.
Singapore’s
ageing demographics remain a key challenge and efforts to address this
structural issue continue. For instance, to support greater social spending
associated with an ageing population, the government announced a staggered
increase in the Goods and Services Tax (GST) rate in Budget 2022.
The
stable outlook reflects our expectation that Singapore’s strong governance and
institutions will continue to ensure sound economic management and fiscal
discipline. Given its international competitiveness, we also expect its
external position to remain robust.
Contacts:
Lyana Zainal Abidin, +60-2717 2912/ norlyana@marc.com.my
Lee Si Xin, +603-2717 2942/ sixin@marc.com.my
Quah Boon Huat, +603-2717 2931/ boonhuat@marc.com.my