Despite global economic uncertainties and the potential risks in their domestic political issues or economic situations, the credit quality of Asia’s sovereign governments would remain stable over the the next 12 to 18 months, Standard & Poor’s (S&P) Ratings Services said in a report released yesterday.
The international ratings agency said most Asia-Pacific economies had enjoyed a relatively strong credit position thanks to their sound external balance sheets and modest government debt levels, and their economic performances had held up reasonably well, primarily because of the impact of economic stimulus from China.
However, many Asia-Pacific economies would inevitably feel the impact if they were to be hit by another major economic or financial shock, according to the report, Asia-Pacific Sovereigns: Mixed Outlook In An Uncertain Year.
“We expect neither sovereign upgrades nor downgrades to dominate the trend in this region,” S&P’s Singapore-based analyst Tan Kim-eng (陳錦榮) said in an e-mailed statement.
“Still, the global growth outlook, external funding pressures, domestic political issues, and unexpected changes in policy or economic environments can put pressure on ratings,” Tan said.
Tan said the experience of global recession during 2008 to 2009 showed that deepening regional trade did not materialize as a strong shield against a sharp recession in the developed economies.
The Asia-Pacific region could still benefit from another Chinese stimulus if another global recession occurs, S&P said. However, it may not come quite as strongly or quickly as some may hope due to domestic political reasons in the country, it said, adding that both Japan and Vietnam would likely see the strongest downward pressure on their sovereign creditworthiness.
“Besides Japan and Vietnam, economies that are major exporters, borrowers of commercial international funds, and those that have seen high credit growth face risks from external shocks,” Tan said.
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