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Moody's: Singapore's growth likely to remain subdued

Staff writer |
Moody's expects Singapore's GDP growth for calendar 2016 at about 1.6 percent, after expanding by 2.0 percent in 2015.

This forecast for 2016 is at the lower end of the government of Singapore's estimated growth range of 1.0 percent to 3.0 percent, said the credit rating agency in a report.

Growth is expected to be significantly slower than it was between 2000 and 2010, when it averaged at 6.2 percent annually, Moody's said.

"A slowdown in external demand will remain the key drag. Industries with high exposure to global conditions, such as engineering - including marine and offshore engineering - and oil and gas, will be most affected."

Moody's says that as one of the most trade-dependent economies globally, Singapore is especially vulnerable to the current lackluster global trade conditions.

In particular, Singapore's close trade and financial linkages with China, imply that the slowdown in China presents significant challenges for Singapore, particularly given the island state's role as an international financial center in the Asia Pacific region.

Moody's points out that the government's ongoing efforts to restructure the country's economy through productivity increases and a calibrated management of foreign labor have yielded mixed results thus far.

However, Singapore's Singapore manufacturing rating remains supported by very high per capita income levels, economic competitiveness, strong fiscal metrics, and robust institutions. Fiscal buffers are strong, owing in part to prudent fiscal rules that require a balanced budget over each term of government.

While government debt levels are modest, debt in the corporate sector has risen, and could present risks for the banking system, as global interest rates tighten, against the backdrop of volatile currency movements, according to the report.

"The stable outlook reflects the government's very strong credit fundamentals.

"However, the rating could come under downward pressure if ongoing restructuring efforts fail to keep growth from slowing further to levels below those consistent with Singapore manufacturing peers over the medium term, or if the government's fiscal position weakens materially either because of lower growth or a shift in fiscal policy," Moody's noted.

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