Singapore's central bank has refuted suggestions in a prestigious US magazine that the affluent city-state faces a risky credit bubble linked to high property prices.
A statement issued late Tuesday by the Monetary Authority of Singapore (MAS) said the property market is stabilising, household balance sheets are strong and the financial system is robust.
"Singapore is not facing a credit bubble that puts the country or its banking system at any risk of crisis," the MAS said in response to an online article in Forbes magazine published this week.
"Serious observers and investors are not in doubt about the country’s financial health."
In the article, Forbes contributor Jesse Colombo warned Singapore was headed for an "Iceland-style meltdown", referring to the European nation that was brought close to bankruptcy when the financial crisis broke in 2008 and exposed the vast over-expansion of its banking system.
Colombo warned low interest rates have led Singaporean households and companies to borrow more, fuelling a surge in property prices that may not be sustained.
He said the risk is that the US could end its zero interest rate policy in the next few years, lifting borrowing costs around the world and bursting bubbles such as in Singapore, leaving investors with huge debts they cannot repay.
"Singapore's bubble will most likely pop when bubbles in China and emerging markets pop and as global and interest rates continue to rise," Colombo wrote.
"The growth of Singapore's credit bubble is inextricably linked to the country's soaring property bubble because Singaporeans are going into debt to invest in property or buy more expensive houses than they can afford, similar to Americans during the US housing bubble of 2003 to 2007."
But the MAS said the government has "taken decisive steps to cool property demand and prevent excessive leverage".
New housing loans continue to decline, with the number falling 35 percent year-on-year in the third quarter of last year, it said, adding that property prices are also falling.
It also said that the average loan-to-value ratio of outstanding housing loans stands at a healthy 47 percent as of the December quarter.
"Third, the financial system is robust," MAS said.
It pointed to an assessment by the International Monetary Fund (IMF) that found Singapore's financial system "would remain sound" even if there was a sharp hike in interest rates and slump in property prices.
The IMF also said Singapore's banks are "resilient, with strong financial and capital positions".
Rajiv Biswas, Asia Pacific chief economist at global consultancy IHS, told AFP regional central banks and financial regulators are aware of the risks and have taken measures to prevent credit bubbles from building up.