DBRS Morningstar Releases Commentary on NOR & SGP: Ratings Supported by Sovereign Wealth Funds

DBRS Inc. (DBRS Morningstar) released a commentary titled “Norway & Singapore: Ratings Supported by Sovereign Wealth Funds”.

Norway and Singapore’s AAA ratings are supported by the strength of their respective public sector balance sheets. Both sovereigns have accumulated large fiscal surpluses for several decades and have established sovereign wealth funds (SWF) to invest these surpluses into a diverse range of foreign assets. As it stands, Norway’s fund is valued at USD 1 trillion, while Singapore’s SWF is estimated to be USD 440 billion. Both governments are taking a long-term view on the inter-generational distribution of assets. In each country, their SWFs manage their accumulated fiscal surpluses and are both a current source of income (supplementing the annual budget) and a future source of resilience (buffering shocks during downturns).

Both countries issue debt to carry out policy objectives, rather than for financing government spending. Singapore carries a higher gross debt burden (at 114% of GDP) than Norway (39% of GDP), but both countries have the flexibility to reduce debt or to finance deficits without increasing debt issuance when confronted with adverse domestic or external shocks.

“Both Norway and Singapore are highly open and exposed to external shocks, particularly those involving their larger neighbors (the Euro Area for Norway, China for Singapore). The strong public sector balance sheets of both Norway and Singapore, coupled with the prudent management of the sovereign wealth funds, make their AAA ratings resilient to external shocks.” said Rohini Malkani, Senior Vice President, Global Sovereign Ratings.

The commentary titled “Norway & Singapore: Ratings Supported by Sovereign Wealth Funds” is available at www.dbrs.com.

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