Fitch Ratings has affirmed Singapore's AAA sovereign ratings, citing its strong economic fundamentals and stable political scene.
The credit rating agency said its view weighs the country's exceptionally strong external balance sheet, robust fiscal framework, high levels of per capita income and strong governance against its high vulnerability to external shocks, given that Singapore is a small open economy.
The ratings are seen as indicators of the risk level of a nation's investing environment and the government's chance of default.
Fitch has revised its growth outlook for Singapore over 2015 and 2016 to an average of 2.1 per cent, from an earlier forecast of 3.2 per cent.
However, this growth slowdown is not expected to translate into a significantly weakened credit profile, it said.
This is because Singapore's external balance sheet remains strong, while fiscal discipline remains underpinned by a constitutional mandate that requires the Government to run a balanced budget, on average, during its term.
The agency flagged some potential risks to Singapore's credit rating, including a severe regional or global economic shock sufficient to force the country to draw down past reserves on a scale that impairs its balance sheet strength.
This would have to be more severe than the global financial crisis, Fitch said.
A second risk involves sustained rapid credit growth that eventually increases Singaporean private-sector borrowing and leads to reduced resilience to macroeconomic volatility.
These have a major spillover into the economy because of the large size of the banking sector.
Fitch also pointed out some political issues that have been gaining ground, including rising income inequality, an ageing population and increasing participation in the labour force by foreigners. It noted that Singapore has embarked on a restructuring drive which "aims to raise the level of productivity, in order to maintain growth in the face of an ageing population and slower population growth".
"The Peoples' Action Party was re-elected... with a strong mandate, which could be positive for continued implementation of policies to address these issues."
This article was first published on December 1, 2015.
Get a copy of The Straits Times or go to straitstimes.com for more stories.