Geopolitics continue to cloud outlook for Asia-Pacific sovereigns — report
‘A worsening of the conflict in Ukraine or that of the Middle East likely poses the most risk to stable sovereign outlooks in the Asia-Pacific’
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Daily Tribune‘A worsening of the conflict in Ukraine or that of the Middle East likely poses the most risk to stable sovereign outlooks in the Asia-Pacific’
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S&P Global Ratings says it is expecting economic and financial conditions to maintain ratings on most sovereigns in Asia-Pacific in the next one to two years.
Changes in the geopolitical landscape pose the greatest risk to what has been a steady year in Asia-Pacific, according to a report published today, titled, "Asia-Pacific Sovereign Rating Trends 2024: Geopolitics Continue To Cloud Outlook."
"A worsening of the conflict in Ukraine or that of the Middle East likely poses the most risk to stable sovereign outlooks in the Asia-Pacific," said S&P Global Credit Ratings credit analyst Kim Eng Tan.
"By affecting volatility in the commodity and financial markets, such a development could renew the burden on external and fiscal metrics on regional sovereigns. With many elections coming up in parts of the Asia-Pacific, governments may be distracted," Tan said.
Shielding populations from high price impacts
"They may also be more likely to shield their populations from the impact of higher prices, even at the cost of deteriorating credit metrics. If these strains persist, rating outlooks could become more negative," he added.
Economic growth in 2024 is unlikely to be as strong as 2023 but will remain resilient in most cases. Exports should pick up after a weak year in 2023, while international travel should continue to recover.
Moreover, lower energy prices and expectations that interest rates have likely peaked mean that the strain on external metrics should pose less risk to sovereign credit.