Singapore’s sovereign credit rating remains stable

International ratings agency, Moody’s, said it has no immediate plans to review its sovereign credit rating for Singapore as the country has strong credit fundamentals, including robust external assets.

Singapore has the highest triple-A sovereign rating from Moody’s, and this is likely to remain so for the next 12 to 18 months.

Last year, Moody’s upgraded the rating for six Asian economies – China, Indonesia, Korea, Japan, Hong Kong and Macau. But so far, there have been no such revisions this year, given the slow economic outlook.

Moody’s said it is keeping a close eye on rising inflation in Asia.

Thomas Byrne, senior vice president of Sovereign Risk Unit at Moody’s Singapore, said: “If inflation is a temporary phenomenon, then it won’t have any effect on the ratings.

“However, if it’s persistent and it starts to undermine the government’s fiscal position, and if it leads to a loss of confidence and therefore external investors or even domestic investors are less willing to finance government budget deficits, then that perhaps would have rating implications if it were strong enough.

“Another factor – which we see elsewhere and not so much in East Asia – is the political instability that comes from higher inflation. There have been food riots in Egypt and also in some other countries in South Asia.

“But we haven’t seen any serious political side effects of high inflation in Asia. It’s something we’re monitoring, but we haven’t seen it yet.”

Inflation in Vietnam hit more than 25 percent in May and Fitch has already lowered its outlook for the country’s sovereign rating from ‘stable’ to ‘negative’.

Moody’s said it is still looking at its numbers and, for now, it maintains a positive outlook for Vietnam.

But other economies in the region are also seeing inflationary pressures and economists said rising prices may threaten the likes of Indonesia and the Philippines.

The Philippine government has been seeking to balance its budget by this financial year, but rising inflation could derail that target, which could have a bearing on its sovereign ratings. – CNA/so

Source : Channel NewsAsia – 30 May 2008

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