Moody's cuts 2016 growth forecast for Singapore

Moody's says that Singapore's fiscal buffers are strong and government debt levels modest, but that debt in the corporate sector has risen and could present risks for the banking system
Moody's says that Singapore's fiscal buffers are strong and government debt levels modest, but that debt in the corporate sector has risen and could present risks for the banking system. ST PHOTO: JAMIE KOH

Lower 1.6% outlook reflects global conditions and close trade links with China, says agency

Singapore's growth forecast for this year has been pared again, this time by ratings agency Moody's.

Moody's said yesterday that it was cutting the growth forecast from its earlier projection of 1.8 per cent to 1.6 per cent.

The forecast is at the lower end of the Government's estimated growth range of between 1 per cent and 3 per cent. It is also lower than the forecast from a Monetary Authority of Singapore poll of private sector economists released earlier this month, which tipped gross domestic product growth of 1.8 per cent this year.

Ms Anushka Shah, assistant vice- president and analyst at Moody's Investors Service in Singapore, attributed the reduced forecast to two key factors - lacklustre global trade and Singapore's close trade and financial linkages with China.

"In addition, we are seeing a slowdown in retail and lowered private sector consumption, which is dragging overall growth," she said.

The silver lining for growth is in public sector consumption, Ms Shah said, citing an ongoing increase in public sector infrastructure, such as the expansion of Changi Airport.

The agency's annual credit report highlighted that Singapore's Aaa rating and stable outlook reflect its high per capita income levels, economic competitiveness, strong fiscal metrics, robust institutions and the Government's strong credit fundamentals.

Moody's said that Singapore's fiscal buffers are strong, in part due to prudent fiscal rules that require a balanced budget over each term of government.

It added that while government debt levels are modest, debt in the corporate sector has risen and could present risks for the banking system as global interest rates tighten against the backdrop of volatile currency movements.

Moody's warned that the rating could come under downward pressure if ongoing restructuring efforts fail to keep growth from decelerating further to levels below those consistent with other nations with an Aaa rating.

The rating could also be affected if the Government's fiscal position weakens because of lower growth or a shift in fiscal policy, it said.

A version of this article appeared in the print edition of The Straits Times on June 30, 2016, with the headline 'Moody's cuts 2016 growth forecast for Singapore'. Print Edition | Subscribe