Singapore's credit profile remains resilient despite rising government spending in the latest Budget, Fitch Ratings said yesterday.
The rating agency said in a research note that Singapore's "disciplined fiscal framework and healthy finances" relative to its peers are not at risk from rising expenditures.
The Budget is projected to move into a surplus of 0.8 per cent in the fiscal year starting on April 1, from a 1.2 per cent deficit in the previous fiscal year.
This mainly reflects a reduction in special government transfers, and the inclusion of Singapore investment company Temasek Holdings in the net investment returns framework this year.
Singapore's constitutional requirement on a government to run at least a balanced budget over its five-year term often means governments run surpluses early in the term to build a buffer in case deficits need to be incurred later, Fitch noted.
The agency added that Singapore "is facing long-term economic challenges from an ageing population, social pressures from perceived widening income inequality and a need to bolster productivity to enhance long-term growth".
The latest Budget marks a continuation of rising government spending to address these challenges, and the Singapore Government has "been proactive in increasing revenues to ensure that fiscal targets are met over the medium term".
Still, Fitch flagged some key risks.
Top among these is a major regional or global external shock, which would hit Singapore hard because of its high export dependence.
Singapore's "outsized financial sector" and its international linkages also make it more susceptible to global financial developments, the ratings agency noted.