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Investing.com -- Fitch Ratings has confirmed Singapore's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AAA', maintaining a stable outlook. This affirmation reflects Singapore's robust fiscal and external balance sheets, supported by large external and fiscal surpluses, high income per capita, prudent fiscal management, and a favorable business environment.
Singapore's economy is expected to slow to 2.6% in 2025 and 2.4% in 2026, after a 4.4% expansion in 2024. This slowdown is attributed to weaker global growth and a slowdown in Singapore's key trading partners, the US and China. Despite these challenges, growth is expected to remain within its potential of between 2% - 3% in the medium term, supported by ongoing investment in infrastructure and technology-driven sectors.
Singapore's net international investment position, estimated at about 150% of GDP, is a key credit strength. The government does not disclose the overall size of official external assets, notably those of GIC Private Limited, a sovereign wealth fund. GIC manages well over USD100 billion of assets, but Fitch estimates the actual value of its external assets could be about 1.5x GDP.
In the fiscal year starting April 2024 (FY24), Singapore recorded a SGD6.4 billion surplus, or 0.9% of GDP, surpassing the budgeted SGD0.8 billion (0.1% of GDP). The authorities project an overall fiscal position of SGD6.8 billion in FY25, or 0.9% of GDP. This projection seems achievable as revenue is likely to outperform despite the inclusion of cost-of-living measures in the budget.
Fitch estimates Singapore's fiscal reserves at 2x-3x GDP, including state-owned Temasek Holdings Private Limited and GIC's assets, reflecting decades of fiscal surpluses and investment returns. Gross general government debt, mainly for local debt-market development, is expected to remain stable, at about 40% of GDP over FY25-FY26.
A general election is due by November 2025, but the outcome is not expected to affect Singapore's strong record of prudent macroeconomic policies and adherence to fiscal rules. Core inflation continues to decline, falling to 0.6% in February 2025, from 3.6% a year earlier. Headline inflation is expected to be 2% in 2025, in line with the authorities' target of 1.5% to 2.5%.
Singapore's three major banks are among the highest rated globally. Despite global uncertainty likely to limit loan growth for the remainder of 2025, asset quality remains healthy and non-performing loan ratios are expected to stay manageable.
Singapore's 'AAA' ratings cannot be upgraded as they are at the highest end of the rating scale. However, a substantial deterioration in the sovereign and external balance sheet or a severe banking system crisis could lead to a negative rating action or downgrade.
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