Amidst concerns of a real estate bubble and a steep rise in personal debt, Moody's has downgraded the Singaporean banking system to negative.
The burden of a staggering rise in personal debt is significant. Banks therefore, could see a discreet contraction in future earnings as the disposable income of people plummets and the ability to repay loans diminishes.
Economic growth in Singapore is still sound, but real estate inflation at the rate seen in Singapore could undermine the positive aspects of the Singapore economy.
Family debt rose to 77.2 % , and property values have more than doubled in six years. Such a rate is unsustainable and could cause the real estate market to collapse much the same way it did in the United States in 2008.
In addition, Singapore banks generate almost 40% of their revenues from overseas. As the US begins to restrict liquidity, the interest rates in Singapore could be significantly impacted.
Although the Federal Reserve chairman has related his intention to taper off gradually the economic stimulus, a whopping 85 billion dollars a month bond purchase could be shut off in mere months.
Source: France 24/ 7.15.13
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