2015 Budget gets thumbs up from S&P

Ratings agency lauds institutional and governance effectiveness

Singapore's 2015 Budget has received an emphatic thumbs up from global ratings agency Standard & Poor's (S&P).

The agency said yesterday that the latest national financial report shows the continuing strength of the Government's "institutional and governance effectiveness".

It also affirmed Singapore's sovereign credit strength with a top AAA unsolicited rating and a "stable" outlook.

In other words, it believes that an investor who buys Singapore Government bonds will extremely likely be repaid.

"The Singapore Budget focuses on longer-term fiscal challenges even as it addresses the immediate capacity constraints in transport and health services - areas that will see significant increases in spending," said S&P credit analyst Phua Yee Farn.

The agency noted in a release that the policies announced in the $68.2 billion Budget are aimed at boosting the country's economic growth potential, retraining Singaporean workers and ensuring increased funding to meet the needs of Singapore's ageing population.

At the same time, investments in these areas "significantly outsize" the $705 million transfers to households.

"These measures should help maintain Singapore's credit strengths even as the population ages at one of the fastest rates in Asia," said the agency.

It estimates that after accounting for revenue not reported as part of the Budget, the general government account will remain in surplus over the fiscal years ending next month and in March next year.

The Government projects a Budget deficit of $6.7 billion, or 1.7 per cent of gross domestic product, in the fiscal year ending March next year, after a nearly balanced Budget in the current fiscal year.

For CIMB economist Song Seng Wun, the stellar rating did not come as a surprise.

"Singapore has come a long way from 50 years ago, and the focus in the Government's Budget has shifted from economic survival to protecting the successes it has achieved," he noted.

"Through it all, a consistently prudent and far-sighted fiscal policy has been key, and it is one (that I believe) the Government will continue to sustain."

tsjwoo@sph.com.sg