Asia-Pacific sovereign ratings 'stable'
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Sovereign ratings in Asia-Pacific will remain largely stable despite China's slowdown, continuing global headwinds and volatility in global capital markets, according to Moody's Investors Service.
The regional outlook is in line with Moody’s outlook for global economic growth, which has also not changed significantly since the rating agency’s Asia-Pacific 2013 Sovereign Outlook was published in January.
Support for the Asia-Pacific growth outlook will continue to come from the moderate pace of recovery in the US and the sturdy economic and fiscal fundamentals of most countries in the region. The recession in the euro area also still represents a prominent constraint.
Yesterday, Moody’s released its “Asia Pacific 2013 Sovereign Mid-Year Update: Broad Regional Stability amid Continuing External Volatility” as an update to markets and not as a rating action.
Sovereigns in the region are likely to withstand continued market volatility as key metrics for growth, fiscal and external performance remain well positioned.
No downward pressure seen
Moody’s does not see material downward pressures on the 21 of 22 rated sovereigns in the region with stable outlooks. The exception is Pakistan (Caa1), which has a negative outlook.
Although regional economic expansion has moderated since last year, it remains stronger than other regions.
The deceleration of the Chinese economy poses growth risks for the region, as the country is a major source of demand for Asia-Pacific’s exports.
The extent to which growth slows will be partially determined by policymakers, as China moves to rein in credit expansion and restructure its economy to reduce reliance on investment as a driver of growth.
The outlook for the global economy will also weigh on the growth prospects for China’s economy, which is highly open.
Governments in the region are seen running tight fiscal policies, or continuing with gradual fiscal consolidation.
