Asia-Pacific sovereigns should continue to show resilience in the face of the
latest global economic challenges, says Standard & Poor''s Ratings Services
in a new report, Steady Outlook For Asia-Pacific Sovereign Ratings Amid Global
Instability, released today. In
addition, Standard & Poor''s today published its annual Asia-Pacific Sovereign
Report Card, which offers a detailed overview of the factors that will shape the
credit quality of individual Asia-Pacific sovereigns in 2008 and beyond. "The
Asia-Pacific will, like the rest of the globe, feel the pressure from the current
disturbances on global equity and credit markets. In addition, growth forecasts
for 2008 increasingly highlight the possibility of a more marked slowdown in the
US and Eurozone economies, which could weaken export growth in the Asia-Pacific,"
said Standard & Poor''s credit analyst Elena Okorotchenko. "Further increases
in oil prices due to potential supply shocks could represent another significant
challenge to Asia-Pacific sovereigns." Nevertheless,
the fundamentals suggest that Asia-Pacific sovereigns are well placed to absorb
these potential risks. However, in the event that such risks materialize and become
more severe or protracted, much will depend on the ability of Asia-Pacific sovereigns
to provide adequate policy responses and avoid policy mistakes. This ability to
respond appropriately could be tested if certain domestic or regional political
concerns increase. Over
the past few years, many countries in the Asia-Pacific region have demonstrated
better fiscal performances, improved the quality of their banking systems, and
strengthened their external positions. These efforts have placed the region on
a reasonably steady footing for 2007-2008, which is evident in the predominance
of stable and positive outlooks on the credit ratings of Asia-Pacific sovereigns.
Of the rated 22 sovereigns, 15 are currently on stable outlooks, five are on positive
outlooks, and only two sovereigns, Taiwan and Fiji, are on negative outlooks.
"In the
medium term, greater efforts in structural and fiscal reforms, further deepening
of domestic capital / debt markets, increased investment in infrastructure, and
improvements in public sector transparency and predictability could see positive
ratings actions
on many Asia-Pacific sovereigns," said Okorotchenko. "Conversely, a
stalling or reversal in the reform process or significant policy missteps could
slow down the positive credit momentum and even put downward pressure on the ratings
on emerging Asia-Pacific sovereigns."
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