Singapore rating to remain stable: Moody's

Singapore rating to remain stable: Moody's

SINGAPORE (Reuters): Singapore's Aa1 sovereign rating is likely to stay in place for the medium term despite ongoing problems in neighboring Indonesia, a senior analyst with Moody's Investors Service said on Friday.

"I think that if the crisis were to go on or to worsen in both Indonesia and Malaysia, one would have to give that some thought," Moody's sovereign analyst for Singapore, Malaysia, Indonesia and Hong Kong, Steven Hess, told Reuters.

"Singapore's rating at Aa1 already did incorporate the neighborhood where it is located to some extent."

Hess said Singapore's large balance of payments surplus, large fiscal surplus, strong international assets position and lack of foreign debt would have given the city state an Aaa rating.

"We did not assign a triple A rating to Singapore precisely because we did feel that it was dependent on Malaysia and Indonesia."

Hess said the Aa1 rating was expected to stay stable over a long period of time and was very secure.

"At that very high level, what the rating indicates to investors is that the country is able to withstand shocks.

"We expect that if there should be a shock, Singapore would be able to withstand it in the financial sense. Of course there are undesirable consequences domestically for unemployment but in the financial sense, we believe that Singapore has a strong position."

Hess said the government's official 1999 gross domestic product (GDP) growth forecast of minus one to plus one percent was not "out of the realms of reality".

"We probably would tend to think it is as more on the minus side then the plus side but I don't think it's very far away from the range that the government has announced."

Hess said Singapore's financial system reforms, aimed at securing a position as a regional and global financial center for the city-state, were positive, but he sounded a note of caution about lifting restrictions on the trading of the Singapore dollar.

"You have to proceed with caution in the current environment. Ultimately in the long run, to be a true financial center and to increase your market share as a global financial center, having fewer restrictions on currency is certainly one competitive edge."

"In the current environment of great volatility in global capital flows, I certainly wouldn't be one to say it is desirable to lift all controls immediately."