SINGAPORE May 9 The world could face another
major financial and economic crisis if the United States loses
its AAA sovereign rating, a top official at Singapore sovereign
wealth fund GIC said on Monday.
Separately, Singapore Prime Minister Lee Hsien Loong said he
did not expect U.S. President Barack Obama to tackle the
country's huge deficit until after presidential elections in
2012, in a sign of growing global unease about the U.S. economy.
"We face the possibility of another major financial and
economic crisis if the world's risk-free asset, hitherto U.S.
bonds, loses its AAA credit rating in a disorderly manner," GIC
Deputy Chairman Tony Tan said at a conference to mark the fund's
He did not elaborate.
GIC, also known as the Government of Singapore Investment
Corp, manages around $300 billion in assets and is one of the
world's largest sovereign wealth funds. About 36 percent of its
funds were invested in the United States as of March 2010,
according to GIC's last report. [ID:nSGE68Q00R]
The U.S. budget deficit totaled $871 billion for the first
seven months of this fiscal year, significantly above the
previous year's pace, the Congressional Budget Office said on
The Singapore prime minister said Standard & Poor's recent
warning that it may cut the United State's AAA sovereign rating
has so far not affected U.S. government bond yields, but has
created uncertainty as it is unclear what other currency could
become a new anchor for the global economy.
He said U.S. did not lack the resources to solve its deficit
problems but Obama would likely put off tackling the issue until
after the next presidential election as it would be difficult to
convince the American public to accept the pain.
"Unresolved, the reality of the fiscal challenge must
eventually affect confidence in the U.S. economy, the ability of
Americans to continue financing their debt and ultimately the
value of the U.S. dollar," Lee said at a lunch for top
executives from Singapore firms as well as staff from GIC.
(Reporting by Kevin Lim; Editing by Raju Gopalakrishnan)