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Singapore wealth fund sees major crisis if US loses AAA status
May 9, 2011 / 10:58 AM / 6 years ago

Singapore wealth fund sees major crisis if US loses AAA status

SINGAPORE, May 9 (Reuters) - 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 30th anniversary.

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 Friday. [ID:nN06238179]

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)

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