Credit rating agency Fitch Ratings affirmed Singapore at AAA with a stable outlook, citing factors such as strong governance indicators.

It said in a statement yesterday that this reflects Singapore's high per capita income levels, strong governance indicators, and exceptionally strong external balance sheet and robust fiscal framework.

These are balanced against its "high degree of vulnerability to shocks, because of the economy's significant trade dependence and a financial sector that is highly integrated with the rest of the world".

AAA ratings reflect the lowest expectation of default risk, and are "assigned only in cases of exceptionally strong capacity for payment of financial commitments".

Fitch has revised its growth outlook for Singapore down for this year to 1.8 per cent, from an earlier forecast of 2.1 per cent. It also expects growth to only recover gradually to 2 per cent by 2018.

This was due to weaker external demand and the ongoing economic adjustment under the Government's economic transformation programme, which aims to reduce dependence on low-cost imported labour and raise productivity.

The agency called it an ambitious programme and said that the transition would be challenging.

"An ageing population, participation in the labour force by foreigners and increasing income inequality remain important political issues, although currently we do not see these as posing a risk to political stability," added Fitch.

High per capita income and a favourable investment climate, which is stronger than that of many AAA-rated peers, continue to support the rating. Singapore is also at the top of the World Bank's Ease of Doing Business index.