Singaporean Resilience to Global Financial Shocks Reflects Strong Economy
Moody’s
Investors Service says that Singapore has demonstrated a very high degree of
resilience to global financial shocks, despite the openness of its economy and
its dependence on global trade and finance.
It
adds that Singapore’s Aaa sovereign rating and stable outlook reflect the
agency’s favourable assessment thanks to “very high” economic, institutional,
and government financial strengths, as well as its “low” susceptibility to
risks from financial, economic, and political events.
According a new Moody’s report, entitled Credit Analysis:
Singapore, the substantial accumulation of public savings, along with fiscal
prudence and a fully funded public pension system, supports the Singaporean
government’s strong financial position.
Singapore’s “very high” economic strength mainly reflects
the trend of a high growth rate for an advanced economy, as well as high
per-capita income. Singapore’s scores on these metrics have exceeded the Aaa
medians in both real gross domestic product (GDP) growth and per-capita income
in terms of purchasing power parity over the last 10 years. In addition, sound
regulatory and supervisory frameworks have helped foster a strong and
well-managed financial system.
Moody’s adds that these factors, coupled with a
competitive economy and investment regime, have led to a strong external
position. Singapore has one of the world’s largest net-asset international
investment positions, while a strong balance sheet ensures debt affordability
and buffers external shocks. The government has also maintained the focus of
its monetary policy on financial prudence, while accommodating demands for
greater social equity.
The rating is further supported by the track record of
political stability and social cohesion since the country’s independence in 1965,
despite the gradual increase in the opposition to the ruling party’s monopoly
on political power. Challenges facing the authorities include containing
consumer price and property inflation over the near term, and fostering a
growth model that is driven by productivity and innovation over the longer
term.