Why Singapore could be the only bright spot in Asia right now

Asia shaken by rising debt levels.

According to ICAEW report, the return to growth in the Eurozone and stronger expansion in the US will offer ASEAN nations space to enact necessary economic and social reforms, according to the latest report from ICAEW.

However, rising debt levels remains a concern for foreign investors across the region, with the exception of Singapore.

The developed nation continues to benefit from its sound financial strategies and strong accounts, as ASEAN members look into initiatives to further strengthen international trade and investment links.

Here's more:

The increase in Eurozone and US demand for ASEAN exports will help offset lower demand from China and Japan.

While the nascent recovery will not dramatically increase ASEAN export levels, it will help ease the drag on export growth the region has been feeling over the past few years.

The establishment of the ASEAN Economic Community will also encourage free trade and improve competition, and should therefore lead to countries becoming more efficient and productive – meaning another boost to export growth over the coming years.

The report however warns that rising debt levels in South East Asian countries like Malaysia and the Philippines present a concern.

Douglas McWilliams, ICAEW Chief Economist and Executive Chairman of Cebr said: “High debt levels are usually viewed negatively by investors, regardless of the underlying state of the country’s economic health.

If investors’ fears of losing their returns become strong enough to cause large increases in the cost of borrowing, then those expectations will become self-fulfilling.

Furthermore, the cost of servicing and repaying a high level of debt would have significant implications for future government spending, investment and household consumption. It would also make countries less attractive to foreign investors.”

“Singapore, however, stands out from the crowd,” he added. “The country’s sound financial strategies have reaped high capital balance, current account surpluses and low yields on investment compared to its neighbours, spurring net capital outflows.

Singapore will continue to benefit significantly from increased demand for its services and goods, as the global economy improves over the coming years.”