S&P keeps Singapore rating at AAA, says possibility of downgrade 'remote'

S&P keeps Singapore rating at AAA, says possibility of downgrade 'remote'
PHOTO: Reuters

S&P Global Ratings kept Singapore's AAA rating and stable outlook unchanged, citing robust public finances despite some concerns on the external outlook.

"Singapore benefits from robust fiscal and external positions, strong institutions, and prudent economic management," S&P said in a statement on Thursday.

"Singapore is exposed to the ebb and flow of global trade and financial markets. Nonetheless, we believe Singapore's significant fiscal and external buffers alleviate potential shocks," it said.

"Timely, forward-looking policy responses are characteristically rolled out by the Singapore government and related institutions when economic and social challenges are encountered."

While S&P noted that the AAA rating could come under pressure if external shocks were to "significantly weaken" the public sector's surpluses, it expected the city-state's substantial reserves and flexible policy responses provided buffers to shocks.

Singapore is among a dozen countries with a AAA rating, including Chinese territory Hong Kong and Australia in the Asia Pacific region.

"The probability of a downgrade in the next two years is remote," it said.

The rating call came as Singapore's central bank announced Thursday that it was maintaining an accommodative monetary policy for an extended period.

Also on Thursday, preliminary data showed the city-state's gross domestic product (GDP) for the first quarter grew 2.5 per cent from a year earlier, down from 2.9 per cent in the fourth quarter of 2016.

But GDP contracted 1.9 per cent on-quarter, on a seasonally adjusted annualized basis.

Reuters said this matched the median forecast in a poll of analysts.

The Lunar New Year holiday can weigh on activity in the first quarter.

Indeed, in the first quarter of 2016, GDP contracted 0.5 per cent on-quarter.

While manufacturing GDP dropped 6.6 per cent on-quarter in the first quarter, that followed a 39.8 per cent on-quarter expansion in the fourth quarter.

Services-producing industries contracted 2.2 per cent on-quarter in the first quarter, but that followed an 8.4 per cent on-quarter expansion in the fourth quarter.

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