, Singapore

Chart of the Day: Singapore's credit-GDP growth gap is Asia's largest

Loan growth outpaced nominal GDP.

According to Nomura, Singapore's nominal GDP growth fell to 1.3% y-o-y in Q1 2013, yet loan growth picked up to a sizzling 19.2% (it eased to 18.8% in Q2; nominal GDP data for Q2 are not yet available). 

So loans growth outpaced nominal GDP by 18.0 percentage points in Q1, and likely by a similar margin in Q2. Singapore‟s credit-GDP growth gap is the largest in Asia.

Here's more from Nomura:

Since quarterly data began in 1981, loans growth has outpaced nominal GDP by more than 18pp on eight occasions: Q2, Q3 and Q4 in 2008, Q2, Q3 and Q4 2012, Q1 2012 and Q1 2013. All are since the global financial crisis.

One reason for this is that Singapore's main monetary policy target is the exchange rate, and so its short-term interest rates closely mimic the near-rock bottom rates in the US.

The upshot is that Singapore's domestic private credit-to-GDP ratio has risen sharply, from 101% in Q4 2008 to 149% in Q1 2013. It is not only the level, but the speed of the debt build-up that is a concern. 

Unless the debt build-up is brought under control, Singapore will be very exposed when the US Fed eventually does raise rates. 

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