SINGAPORE - Singapore's massive foreign reserves will provide a strong buffer for its open economy in the event of global financial shocks, Moody's Investors Service said on Thursday.
The US-based credit ratings agency, which has assigned a top grading of Aaa to Singapore, said the republic had successfully carried out economic restructuring measures and raised competitiveness amid growing challenges from lower-cost neighbours.
'Singapore continues to deliver strong economic results, as befits a country rated Aaa,' Moody's said in its annual report on the Southeast Asian economic powerhouse which has used its reserves to invest and purchase assets worldwide.
'Its large government asset position is a significant credit strength, and combined with foreign currency reserves of US$115 billion at year-end 2005 Singapore is well positioned to weather an unexpected external shock,' a Moody's vice president, Thomas Byrne, wrote in the report.
The substantial investments by two state agencies, Temasek Holdings and the Government of Singapore Investment Corporation, and the ploughing back of returns from financial assets also support the economy, Moody's said. 'Singapore's strong asset position dwarfs its stock of government debt and remains a key support factor in the government's Aaa rating,' Mr Byrne said.
'The ratings are supported by conservative fiscal and monetary policies, a strong government fiscal position, and a very strong net international investment position. Singapore has demonstrated its ability to withstand external shocks, and will likely do so again.'
Moody's report came after Singapore raised its 2006 growth targets to 7.5-8.0 per cent from 6.5-7.5 per cent after a better-than-expected expansion of 7.2 per cent in the third quarter. For 2007, economic growth is projected to weaken to 4.0-6.0 per cent on expectations the global economy will moderate. -- AFP
