Moody's lowers Asia growth forecasts on slowing exports, subdued domestic demand
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Moody's Investors Service has adjusted downwards its economic growth forecasts for many Asia Pacific (APAC) economies due to subdued global growth, exacerbated by weaker demand from China.
Nevertheless, the sovereign credit profiles are resilient to lower growth, because most indicators, such as government debt and balance of payments ratios, remain in line with Moody's assumptions, and within the range for each sovereign's peer group. Despite lower growth rates, the region’s growth is on average still stronger than most other regions.
Moody's conclusions are contained in its just-released report titled "Asia Pacific Sovereigns: Credit Profiles Resilient to Slowing Exports, Subdued Domestic Demand".
It cited that weak demand from China has dampened the overall export outlook for the region, while softer commodity prices weigh on some sovereigns' export revenues, growth and fiscal balances. Domestic demand in most APAC countries is unlikely to offset the effect of slower global growth, partly because an anticipated investment boost from government infrastructure spending has not materialised in some cases.
In addition, households are saving more of their income gains from lower energy costs than previously expected, despite monetary easing by central banks in the region. Market volatility and political risk are also weighing on confidence.
