Negative outlooks on Asia-Pacific economies remain elevated: S&P

July 13, 2017

SINGAPORE - The number of negative outlooks in Asia-Pacific economies remains elevated as global and regional uncertainties weigh on credit metrics, says ratings agency Standard and Poor’s. “Following the upgrade of the Indonesian sovereign credit rating to investment grade, none of the 21 ratings in the region currently record a positive outlook,” S&P says.

 “Potential financial market disruptions associated with higher interest rate expectations in the advanced economies, and unexpected political or geopolitical events, are key risks.
 "The Indonesian sovereign rating upgrade in May 2017 added one more investment-grade sovereign rating to Asia-Pacific and reduced the number of
speculative-grade sovereigns," says S&P Global Ratings credit analyst, Kim Eng Tan.
 "Until this upgrade, the distribution of sovereigns in the investment-grade categories had been stable since we raised the rating on the Philippines in
May 2013. Before the Indonesian upgrade, the number of 'BB'-category sovereigns was last reduced by the downgrade of Mongolia in April 2014."
 Asia-Pacific sovereign credit quality faces risks from possible financial market disruptions, and political and geopolitical developments,” says Tan.
 "An abrupt change in U.S. trade policy toward the region could have significant implications for growth and confidence in East Asia.
 “This could set back efforts to rein in financial risks in economies that have seen significant increases in leverage if export growth cannot offset slower domestic demand. 
“In our view, developments in the Korean peninsula have raised the risk of a military conflict that could have significant negative economic and financial impact across the Asia-Pacific. However, we still view military conflict as an unlikely scenario.” (ATI).