Sovereign credit trends in Asia-Pacific were little changed in the first half of 2024, with only one rating action in the period.
S&P Global Ratings in late May revised the outlook on India to positive from stable. The change reflected our view that policy settings in India will sustain long-term economic growth, improving the government’s fiscal and debt metrics.
“A worsening of the conflict in Ukraine or that of the Middle East remains an important risk to sovereign outlooks in the Asia-Pacific,” said S&P Global Ratings credit analyst Kim Eng Tan in a report titled, “Asia-Pacific Sovereign Rating Trends Midyear 2024: Fiscal Strains Rise.”
“By affecting volatility in the commodity and financial markets, such a development could renew the burden on external and fiscal metrics on regional sovereigns,” Tan said.
“A sudden deterioration in U.S.-China tensions is another risk to sovereign ratings in Asia-Pacific. In the runup to the U.S. presidential election in November, accidental contacts between the countries’ armed forces in the Pacific have a higher chance of causing political and economic damage. This could in turn affect regional sovereign credit metrics,” said Tan.
The stable outlooks on most long-term foreign-currency sovereign ratings in the region (18 out of 21 ratings in Asia-Pacific) suggest there will be few changes in the next year or so.
“We expect economic and financial conditions to allow us to maintain ratings on most sovereigns in Asia-Pacific in the next one to two years,” it said.
The absence of major economic or financial surprises has underpinned sovereign rating stability so far in 2024.
“Our latest economic growth forecast for Asia-Pacific remains little changed from that in late 2023, with positive revisions for some of the larger economies offsetting negative changes in Southeast Asia. Inflationary pressures are steady despite a moderate rise in crude oil prices since the end of 2023. Financing costs have also stabilized even though policy rate cuts in the advanced economies are coming later than we previously expected,” it said.
