Asia-Pacific Sovereign Rating trends stable despite more negative outlooks

SINGAPORE - The number of negative outlooks for Asia-Pacific economies remains at a level not seen since the middle of 2010, when the region was still emerging from the global financial crisis, says S&P Global Ratings.  Sovereign credit trends, however, continue to be stable in most economies in the region over the next one to two years.

"Global economic performance is still weighed down by the lacklustre performances of some advanced economies," said S&P Global Ratings credit analyst, Kim Eng Tan.

"Sovereigns also face uncertainties generated by political developments in Europe and the U.S. These could have negative economic and geopolitical implications for Asia-Pacific."

There are 15 S&P sovereign ratings with stable outlooks and five with negative outlooks in the region as of January 1, 2017. Indonesia is the sole Asia-Pacific sovereign rating with a positive outlook.

Political developments in advanced economies are adding to the challenges that Asia-Pacific sovereigns face, the report says.

"Anti-globalisation sentiments are increasing and the risk of protectionist measures is growing," Tan said. "This is a negative development for
Asia-Pacific, which has benefited much from global trade and investment flows. The risk may rise further if upcoming elections in Europe produce more surprises."

If anti-trade measures become more likely or if the integrity of the European Union is called into question again, financial market volatility could return, he adds.

And the resulting deterioration in financing conditions for sovereigns in this region could weaken credit metrics even before the trade impact becomes evident.  www.standardandpoors.com (ATI).