The slowing global economy, the growing debt problems in the eurozone and the potential tightening of funding conditions mean that the credit quality of Asia’s sovereign governments is facing increasing risk, Standard & Poor’s (S&P) Ratings Services said in a report released yesterday.
Among Asia-Pacific sovereign governments, so far this year only Japan has had its credit downgraded by S&P — despite a negative global trend — while Indonesia and Fiji have both had their credit ratings upgraded by the ratings agency.
BURDENS
However, the recent weakening global economic conditions could slow the pace of upgrades for some Asia-Pacific sovereign economies and even lead to negative rating actions for others that already have higher debt burdens and weaker budgetary positions, the ratings agency said in the report titled: Asia-Pacific Sovereigns: Is The Positive Rating Trend On Hold?
“In some cases, the weaker balance sheets are due to the fiscal stimulus measures employed to offset the previous global slowdown,” S&P’s Singapore-based analyst Tan Kim-eng (陳錦榮) said in an e-mailed statement.
“In others, it was due to the cost of natural disasters adding to fiscal pressures,” the S&P analyst said.
“In the Cook Islands, Japan, Malaysia, New Zealand and Vietnam, net general government debt levels have risen -significantly in the past few years partly for these reasons,” Tan said.
BALANCE
Another analyst at the ratings agency, Elena Okorotchenko, also predicted higher inflation for Asia-Pacific sovereign economies.
Okorotchenko said that, according to the report, central banks in the region are now facing a difficult task as they attempt to balance the need to control inflation and simultaneously boost the economy.
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