Eurozone situation to threaten Asia-Pacific countries in the coming year: S&P

10 Oct 2012

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The main threat to Asia-Pacific sovereign creditworthiness in 2012-2013 remains centered around an unexpectedly severe deterioration of the European Economic and Monetary Union's (eurozone) economic and financial situation.

Standard & Poor's Ratings Services said in a report, Asia-Pacific Sovereigns: A Bit Of Stability In The Sea Of Uncertainty, published on Tuesday, that risks of instability are still substantial, despite the more decisive actions shown by eurozone policymakers.

"Reforms that address fundamental imbalances in the currency union are still in the early stages of implementation," said S&P's credit analyst Kim Eng Tan. "If investors perceive that European politicians are losing the willingness to continue with reforms or if major policy mistakes occur, it may send another financial and economic shock across the world."

Of the 22 rated sovereigns in the Asia-Pacific, S&P raised the credit ratings on the Philippines and South Korea during the past six months and revised the outlook on Vietnam to stable from negative.

"We upgraded the two sovereigns because their credit support improved sufficiently to offset weaker growth prospects in the next few years," Tan said. "Asia continued to register moderate economic growth despite the intensifying global economic uncertainties."

India was the only Asia-Pacific sovereign to see a negative rating action during the period; the outlook was revised to negative from stable.

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