Debt ratings of Asia-Pacific banks and sovereigns, including the Philippines, will not be directly affected by the exit of the United Kingdom from the 28-nation European Union last week, global debt watcher Fitch Ratings said Thursday.
“The UK’s vote to leave the European Union – ‘Brexit’ – has no immediate direct ratings impact on Asia-Pacific sovereigns or banks,” Fitch said in a report.
It said the spike in political uncertainty in the UK and resulting effects on investor risk appetite could pose the greatest challenges for Asia in the short term.
It said protracted uncertainty had a sustained effect on investor and consumer confidence, the resulting tightened liquidity conditions and pressure on emerging markets capital markets could weigh on growth in the region.
“But it remains far from clear that such a sustained market reaction will develop. Some of the negative ‘risk off’ market moves that occurred in the immediate aftermath of the Brexit vote have already been partly unwound this week,” Fitch said.
Fitch said the direct impact from UK trade on Asian economies could also be limited. The UK is the world’s fifth-largest economy and Fitch said it expected a slowdown in short-term GDP growth as a result of the referendum.