MAS Highlights Resilience of Singapore’s Corporate Sector and Financial Institutions Amid Economic Challenges

The Monetary Authority of Singapore (MAS) has highlighted the resilience of Singapore’s corporate sector despite ongoing challenges such as elevated borrowing costs and weaker earnings. In its annual review released on 27 November 2024, MAS noted that businesses have managed to maintain stable balance sheets over the past year, aided by improving economic growth and easing financial conditions.

The report identified key factors behind this stability, including healthier debt maturity profiles, low default rates, and strong liquidity buffers. Corporate debt levels have largely remained below pre-pandemic levels, and borrowing costs are expected to stabilise, further supporting businesses. However, MAS acknowledged that vulnerabilities have moderately increased due to weaker earnings and high borrowing costs. Firms that are capital-intensive or reliant on external markets remain more exposed to risks.

MAS’s stress tests confirmed that most businesses have adequate buffers to weather potential shocks, such as inflation, geopolitical tensions, or trade frictions. Earnings are expected to improve in the latter half of 2024, reflecting Singapore’s robust 5.4% GDP growth in Q3, compared to 3% in Q2. While there has been a slight increase in foreign currency borrowing, MAS indicated that associated risks are limited.

In its evaluation of the financial sector, MAS found that Singapore’s banks and insurers remain robust, supported by strong capital and liquidity buffers. Local banks have continued to record healthy profits in 2024, driven by increases in both net interest and non-interest income. Asset quality remains sound, and precautionary buffers are adequate to address potential credit risks. MAS urged banks to uphold prudent underwriting standards and remain vigilant about liquidity risks.

For non-bank financial entities, including insurers and investment funds, MAS noted continued growth without significant systemic risks to Singapore’s financial stability. Looking ahead, the central bank expects corporate debt servicing capabilities to remain resilient, bolstered by easing financial conditions and steady economic recovery.

Original article by Claire Huang for The Straits Times. Read more here or in the PDF below.

Companies’ debt levels in Singapore low, banks and insurers can withstand shocks_ MAS _ Th.

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