Published April 18, 2009

Fitch affirms S'pore's 'AAA' ratings

External finances remain strong and the government has neither foreign-currency nor external debt, the agency says


CITING Singapore's strong finances, flexible government policies and stable political scene, Fitch Ratings yesterday affirmed the country's 'AAA' sovereign ratings.

The rating agency said that it affirmed Singapore's long-term foreign and local currency issuer default ratings (IDRs) at 'AAA'. It also affirmed the country's short-term foreign currency IDR at 'F1+' and its country ceiling at 'AAA'. Fitch's outlook on the ratings remains stable.

'Singapore's external finances remain strong and the government has neither foreign-currency nor external debt,' Fitch said in its release.

In fact, the country's international reserves (including gold) continued to grow and reached a record US$174 billion as at end-2008 - equivalent to five months of current external payments, it noted.

Singapore's net external credit position also remains solid, Fitch added. While 'the high short-term external debt (80 per cent of gross external debt), especially those of non-bank private-sector entities, could pose a risk amid the tight liquidity conditions', recent government policies to support domestic credit growth could improve the situation, it said.

Fitch noted that furthermore, Singapore's public finances are prudently managed. The general government fiscal surplus (including revenue and payment streams of the Central Provident Fund) was equivalent to 13.6 per cent of gross domestic product (GDP) in FY08/09, which is 'far better than the 'AAA' median'. However, Fitch expects this ratio to drop to 3.9 per cent in FY09/10 due to a sizable fiscal stimulus package.

'The country's public finances are structurally strong despite the current cyclical weakening amid the adverse effects of the global economic recession,' said associate director of Asia sovereign ratings Vincent Ho.

The government on Tuesday cut its 2009 economic forecast to a contraction of 6-9 per cent. Fitch projects that Singapore's economy would contract by 12.6 per cent this year before recovering to grow by 2.2 per cent in 2010.

Despite the positive views on Singapore's public finances, Fitch expressed concerns about the 'transparency of past reserves and balance sheet details of the government and its sovereign wealth fund'- issues which are 'uncommon among 'AAA' sovereigns', it said.