NOTE: On September 26, 2022, the press release was corrected as follows: In the economic data section, External debt/GDP was added. Revised release follows.
Singapore, September 01, 2020 -- Moody's Investors Service ("Moody's") has today affirmed the Government
of Singapore's long-term issuer and senior unsecured ratings
at Aaa. The outlook remains stable.
The rating affirmation is driven by Moody's view that Singapore's
structural credit strengths continue to provide resilience to adverse
cyclical shocks and long-term trends. In particular,
strong institutions and governance and the government's formidable
fiscal reserves underpin the country's ability to weather the unprecedented
shock posed by the global coronavirus outbreak. Although Singapore
faces medium- to long-term risks from challenges to its
externally-oriented growth model, population aging and climate
change, the sovereign's track record of structural transformation
and underlying competitiveness support Moody's view that Singapore
is likely to adapt in a way that preserves its credit profile.
Singapore's long-term local and foreign currency bond and
deposit ceilings remain unchanged at Aaa. The short-term
foreign-currency bond and deposit ceilings also remain at Prime-1.
RATINGS RATIONALE
RATIONALE FOR AFFIRMING THE Aaa RATINGS
CREDIT STRENGTHS REMAIN INTACT
Against the backdrop of a historically severe cyclical shock, Singapore
will retain its structural credit strengths, which underpin its
ability to weather future shocks and adverse long-term trends.
In particular, strong public finances and capable administration
have allowed for a significant fiscal response to help guard against more
material economic and financial risks. Approximating 20%
of GDP, the countercyclical package committed to date is large and
will prevent more severe damage to the economy than currently implied
by Moody's projection of a 6.2% contraction in real
GDP for 2020.
While larger as compared to relevant peers, the magnitude of Singapore's
policy response will not contribute to a rise in government indebtedness.
Moody's expects that a fiscal deficit of 15.6% of
GDP in 2020 will be funded entirely by accumulated surpluses and past
reserves, thereby preserving fiscal strength. Even as the
government draws down an unprecedented amount from its reserves,
Moody's estimates that Singapore's financial buffers will
remain large, allowing ongoing contributions to the annual budget
and providing contingent sources of extraordinary financing in the event
of future shocks.
Singapore's strong banking system and exceptionally healthy external payments
position will also remain intact, contributing to macroeconomic
stability and supporting the recovery once the shock subsides.
COMMITMENT TO FISCAL DISCIPLINE AND STRUCTURAL REFORM AMID POLITICAL EVOLUTION
Moody's expects the government to adhere to its long-standing
disciplined approach to fiscal management. Beyond the wide deficits
incurred to offset the near-term impact of the coronavirus outbreak,
Moody's expects that fiscal balances will revert to surplus or near-surpluses
over the medium-term with the government promulgating the necessary
adjustments to accommodate higher spending needs related to population
aging, infrastructure development and economic restructuring.
Even prior to the coronavirus outbreak, Singapore's growth
model was already being challenged by wider global trends, such
as rising trade protectionism, the associated impact on the restructuring
of supply chains, the emergence of disruptive technologies,
and digitalization. With the pandemic shock potentially accelerating
these shifts, the government's policy response includes ongoing
funding towards structural transformation, with an emphasis on skills
upgrading and improving productivity. Moreover, the government
has already embarked on initiatives to review and make necessary adjustments
to prevailing growth strategies in light of possibly long-lasting
shifts brought about by the pandemic. The sovereign's track
record of preempting and adapting to structural changes in industry and
services bodes well for its capacity to adjust to global trends in the
next few decades.
Similarly, the government has announced over the past year adjustments
to the policy framework to accommodate population ageing. In particular,
the retirement age will be gradually increased to 65 by 2030 from 62 currently,
while the re-employment age—the maximum age for which employers
are obligated to renew employment beyond the aforementioned retirement
age—will be similarly increased to 70 from 67. In conjunction
with these changes aimed at assuring continued employment, the government
has bulked up wage subsidies for older workers and will build on the targeted
expansion of the social safety net that had already been progressively
enhanced over the past decade.
Elections held in July 2020, in which the opposition secured a historically
large proportion of seats in Parliament, has limited implications
for political risk. Abrupt policy changes or impairments to policy
effectiveness appear unlikely. While the ruling People's
Action Party continues to maintain a strong mandate to govern, having
won 83 of 93 contested seats in the legislature and more than 60%
of the popular vote, the subsequent establishment of an official
"Leader of the Opposition", a role common in other countries
but newly instituted in Singapore, indicates a nascent institutionalization
of stronger checks and balances, likely leading to a more consultative
form of governance that potentially improves accountability.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Environmental considerations are not material to Singapore's credit
profile, despite exposure to climate change-related risks.
Global warming and a sustained rise in temperatures could have an impact
on long-term health and remediation costs. Singapore as
a low-lying island nation is also vulnerable to rising sea levels
over the long run, with potential consequences including coastal
erosion, more frequent and severe flooding, and the contamination
of its domestic water supply with seawater. Periodically,
Singapore's air quality has deteriorated because of smoke from fires in
neighboring countries, which have been set to clear land for cultivation.
This has led to occasional disruptions to sectors such as tourism and
air transport. However, while Singapore is exposed to environmental
risk, it is well positioned to adopt climate adaptation strategies
given the institutional, technical and financial resources at its
disposal.
Social considerations are not material to Singapore's credit profile.
Like many other developed economies, Singapore faces demographic
pressures from an aging population, although its historic openness
to foreign labor remains a key mitigant to the potential impact on long-term
economic growth. At the same time, Singapore retains considerable
fiscal flexibility to accommodate an expansion of social spending,
especially for elderly citizens. Its fully funded, defined
contribution savings scheme, the Central Provident Fund, insulates
the government from the potentially large pension liabilities that some
similarly rated peers face.
Moody's regards the coronavirus outbreak as a social risk under
its ESG framework, given the substantial implications for public
health and safety. For Singapore, the shock materializes
in a sharp fall in domestic demand related to pandemic containment measures,
as well as a deterioration in external demand.
Governance considerations are material to Singapore's credit profile.
Its very sound framework of governance and policymaking, incorporating
its track record of prudent regulatory oversight and financial stability,
as well as its forward-looking approach to macroeconomic and fiscal
management, are key factors underpinning Singapore's credit strengths.
RATIONALE FOR STABLE OUTLOOK
The stable outlook is based on Moody's expectation that the government
will maintain its ability to adapt policies that mitigate the negative
impact of changing global economic conditions and a challenging demographic
outlook, to limit the country's vulnerability to external
demand and financial shocks such as the coronavirus outbreak, and
to avoid sustained damage to its currently robust fiscal and external
position.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
The rating could be downgraded should there be evidence that Singapore
is unable to manage the various challenges to its economic model,
leading to a deterioration in Moody's assessment of the country's
economic strength or fiscal strength relative to its Aaa-rated
peers. Such a scenario would involve an erosion of Singapore's
currently ample macroeconomic buffers and very high fiscal strength,
potentially owing to a shift in fiscal policy or the realisation of significant
contingent liabilities.
GDP per capita (PPP basis, US$): 103,181 (2019
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 0.7% (2019 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.8%
(2019 Actual)
Gen. Gov. Financial Balance/GDP: -0.3%
(Fiscal Year 2019 Revised) (also known as Fiscal Balance)
Current Account Balance/GDP: 17.0% (2019 Actual) (also
known as External Balance)
External debt/GDP: [not available]
Economic resiliency: aa1
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On 27 August 2020, a rating committee was called to discuss the
rating of the Singapore, Government of. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have not materially changed.
The issuer's institutions and governance strength, have not materially
changed. The issuer's fiscal or financial strength, including
its debt profile, has not materially changed. The issuer's
susceptibility to event risks has not materially changed.
The principal methodology used in these ratings was Sovereign Ratings
Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1158631.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions in the disclosure form. Moody's Rating Symbols and
Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for
Designating and Assigning Unsolicited Credit Ratings available on its
website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed by
Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main
60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Christian de Guzman
Senior Vice President
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Marie Diron
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
