Moody's: Asia Pacific Sovereigns Resilient To Shocks, Rating Momentum

KUALA LUMPUR, April 23 (Bernama) -- Moody's Investors Service says most Asia Pacific sovereigns have a relatively high degree of immunity to external economic shocks. However, the rating momentum is diverging, as some drive through ambitious reforms, while others struggle with long-standing challenges. Hence, a key risk for credit quality is therefore, whether, governments can deliver on policy pledges, said the rating agency. Moody's notes that four sovereigns in Asia Pacific, namely, India (Baa3), Korea (Aa3), Malaysia (A3) and Pakistan (Caa1), have positive rating outlooks, while one, Mongolia (B2), has a negative outlook. It said a common challenge for emerging economies in the region will come when the US Federal Reserve begins to raise interest rates. Asia Pacific sovereigns generally exhibit a strong external payments positions and government debt profiles relative to peers elsewhere in the world - factors that should stand them in good stead. As most Moody's-rated sovereigns in Asia Pacific are net oil importers, the recent slump in oil prices will have a largely positive impact on the region. Savings on energy costs will support sovereigns in their efforts to rein in budget deficits or rebuild fiscal buffers, Moody's notes. Moody's analysis is contained in its just-released report entitled, "Sovereign Outlook -- Asia Pacific: Credits diverge on domestic factors; resilience to external risks is high." The Moody's report points out that household debt remains elevated in several economies around the region, but does not pose an imminent or significant risk to financial system stability. However, such debt will dampen private consumption growth, which could constrain economic expansion. Moreover, since a significant proportion of retail loans charge variable rates, consumers are directly exposed to rising global borrowing costs, which could amplify pressures on household balance sheets. Moody's also notes that because Europe is a major destination for Asian exports and source of financing for countries in the Asia Pacific, an increased threat of Greece leaving the currency bloc could hurt growth in Asia. -- BERNAMA