Singapore maintains it AAA Credit Rating, when even the largest economy in the world US credit rating slipped to AA+ due to the debt limit standoff. The AAA credit rating is basically the top rating for debt in the world. It means that they are safest borrowers in the world and lenders should feel comfortable lending to them. It also means that Singapore government will be able to borrow at very low rates as compared to other governments.
According to Moody’s, Singapore gets the top rating due to 3 main reasons.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
1. Strong Fiscal Position
The fiscal strength of Singapore is basically supported by prudent policies and the large size of the government assets. Singapore also consistently generates a budget surplus and is expected to have a surplus of $1.6 billion in FY 2014.
The fact Singapore has a fully funded compulsory pension system, which is the CPF, means less strain on the government. The CPF system where everybody is responsible for themselves also helps to mitigate the problems associated with an aging population.
2. Low Debt
With the huge size of government assets and large budget surplus, Singapore government does not actually need to borrow from external creditors. The primary reason for debt issuance by the government is to set as a benchmark corporate debt issuers as well as encourage development of fixed income skill set in Singapore
3. Positive Growth Outlook
Growth in 2014 is expected to be at 4% this year due to strong exports and strong domestic due to public infrastructure projects such as MRT and wage growth. Strong growth is expected at least for the next 5 years, putting the Singapore economy in a good position.
About the Author
Calvin Yeo, CFA, CFP is the Managing Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is is revolutionizing the financial advisory industry by building an online platform to provide high quality and comprehensive financial advice for free.