Moody’s: Singapore’s economic strength ‘very high,’ but protectionism risks persist

Singapore one dollar bill

Moody’s said Singapore’s Aaa stable credit profile reflects a very high per-capita income and a diverse, competitive economy, but that the city-state faces risks from protectionism.

“We assess Singapore’s economic strength to be ‘Very High,’ two notches above the indicative score of ‘High (+),’ to reflect
Singapore’s particularly high GDP per capita (one of the highest in the world and well above the Aaa-median), unusual economic
diversity for its size, and the ongoing shift towards lower, albeit less volatile, economic growth,” Moody’s said in a report dated Wednesday. It noted Canada and the Netherlands have similar scores.

But the ratings agency noted that global trade protectionism poses “near-term risks” as Singapore’s economy is trade dependent.

“We do not believe recent tariffs sanctioned by the United States (Aaa stable) against China (A1 stable), Singapore’s largest trading partner, will have a material impact on Singapore’s economic performance at this time,” it said, but added that if the recent trade measures were to broaden, Singapore would be affected both by its direct ties with the U.S. and China and indirectly via slower economic growth in those two economies and the city-state’s other trade partners.

But Moody’s pointed to Singapore’s fiscal strength.

“A strong external position and sound banking system protect against near-term risks from a downturn in trade and the turn in the global interest rate cycle. Fiscal buffers are strong, owing in part to prudent fiscal rules that require a balanced budget over each term
of government,” Moody’s said.

The Singapore dollar was broadly stable on Thursday, with the U.S. dollar fetching between S$1.3089 and S$1.3111. At 10:33 A.M. SGT, the greenback was fetching S$1.3106.