A stinging commentary warning that Singapore is facing an Icelandic-style economic crash has provoked much debate amongst industry commentators and yielded an official response from the Monetary Authority of Singapore.
According to Jesse Colombo, an economist and columnist for Forbes magazine, the wealthy Southeast island state of Singapore is displaying similar characteristics to Iceland in the run up to its spectacular economic collapse in 2008, amid the rapid expansion of its banking sector overseas and an influx on hot money from abroad.
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Colombo argues that Singapore is subject to a ballooning credit bubble that is driving economic growth and creating the illusion of prosperity. A bubble he says has been fueled by ultra-low interest rates encouraging explosive growth in mortgage and commercial loan borrowing.
The economist points to a plethora of bubbly characteristics in the Singaporean economy, including a high ratio of household debt to gross domestic product (GDP), sky-high property prices and a potential banking crisis if non-performing loans increase once interest rates normalize.