In the opulent shopping mall of Singapore's Marina Bay Sands Hotel, there are queues for the restaurants and the bars have standing room only, while the shops and casino ring with the sound of mainland Chinese punters keen to spend, spend, spend.

However, this prosperous picture is masking a bubble, Jesse Colombo, a columnist with Forbes magazine, argued last week, and he believes Singapore is heading for the kind of crash that
walloped Iceland in 2008.

It has set pulses racing in the city-state, and prompted a flurry of denial from the country's de-facto central bank, the Monetary Authority of Singapore, as well as various economists and commentators in the state-backed media.

Household debt has ballooned in Singapore, Colombo says, because of very low interest rates, and soaring property prices are inflating a bubble, as Singaporeans go into debt to invest in property they can ill-afford.

“The south-east Asian island nation of Singapore is currently inflating one of the most egregious examples of these post-2009 bubbles, and is displaying parallels to Iceland’s bubble that are causing me to believe its boom will end in a similar (but not necessarily identical) manner,” wrote Colombo.

Singapore’s plight is part of a broader emerging market bubble developing, he says and he singles out various warning signs.

Outstanding private-sector loans have risen 133 per cent since 2010. Singapore’s property prices have approximately doubled since 2004, and are up by 60 per cent since 2009 alone, while mortgage loans have grown at 18 per cent per year for the past three years.

A credit bubble has started to emerge since interest rates fell below 1 per cent, and cheap credit is forcing a boom in the building industry.

Household debt

The inflow of hot money has contributed to a 22 per cent increase in the value of the Singapore dollar against the dollar since the financial crisis began, writes Colombo.

He also sees household debt rising strongly, with the ratio of household debt to gross domestic product recently hitting about 75 per cent, one of the highest in Asia, which is up from 55 per cent in 2010 and 45 per cent in 2005, while household income has increased by only 25 per cent and wages by 15 per cent in comparison.

About 70 per cent of Singapore’s mortgages have floating interest rates.

All of this will sound reasonably familiar to people who witnessed the debasing of the Irish economy five or six years ago, and perhaps the response from the Monetary Authority of Singapore would also cause an eyebrow or two to raise in Ireland.

The government has even responded to the article, a highly unusual move.

Singapore is not facing a credit bubble that puts the country or the banking system at any risk of crisis, the Monetary Authority of Singapore (MAS) said in a statement.

“Serious observers and investors are not in doubt about the country’s financial health,” it said, adding that “it is clear that unusually low global interest rates have stimulated credit growth and an increase in property prices in recent years, in Singapore and some other economies that had recovered from the global crisis. That is why the government and MAS have taken decisive steps to cool property demand and prevent excessive leverage.”

CIMB economist Song Seng Wun told MyPaper: "To say the authorities are blind to the risk [of overleveraging] is a bit excessive . . . this region has gone through the [1997] Asian financial crisis . . . measures taken by regulators suggest they are much more mindful of the risk of excesses brought about by cheap lending."

It seems the debate is set to continue. On Friday last week, Colombo responded to the monetary authority's denial, saying: "There must be an unwritten rule in the shadowy world of central banking that demands that dangerous, society-threatening economic bubbles must be denied and covered up at all costs."

'Warning signs'

In response to how senior observers and investors were in no doubt about Singapore’s financial health, he pointed to former Federal Reserve chairman Ben Bernanke and other high-profile economists

who failed to pre-empt the economic collapse seen in the US, Ireland, Iceland and elsewhere.

“The bottom line is that Singapore authorities’ bubble denials do not help the country’s citizens any more than Ben Bernanke’s 2005 bubble denial helped Americans,” he said.

And he said the MAS’s reference to the International Monetary Fund’s reading on Singapore, which said the country should be able to withstand serious stress scenarios, was flawed because it didn’t factor in the risk of “a bubble-induced bust in the Asean region, let alone a crisis that includes China and east Asia”.

“Let’s not forget the IMF – like the US Federal Reserve – completely missed the warning signs that led up to the global financial crisis as well,” he added.

A debate worth following.