Asian sovereigns to hike borrowing in 2010, plan stimulus exit strategies: S&P

18 Dec 2009

Asian sovereigns are likely to remain active borrowers in 2010, with a 5-per cent year-over-year rise in commercial issuance, according to a recently released report by Standard & Poor's Ratings Services titled, Asian Sovereigns To Remain In Debt Markets.

Standard & Poor's survey of borrowing and debt suggests sovereign requirements for 2010 are likely to bring commercial issuance in the region to $2.2 trillion.

But, as sovereigns in Asia consider exit strategies from economic stimulus programmes, Standard & Poor's anticipates that they will seek to strike a balance to prevent a derailing of the still-nascent economic recovery.

"We believe that the test for sovereigns in the coming year will be managing macroeconomic crosscurrents while stimulus-based policies are still in place, despite worries over asset and consumer price trends," said Standard & Poor's credit analyst William Hess.

The article adds that in the longer term, the prospect of lingering deficits, combined with the significant downside risks of a second slowdown in global growth, raises questions about debt sustainability for a number of sovereigns in the region and the implications of borrowing plans on ratings.

"We believe that sovereigns in the region are not yet ready to retreat from capital markets either for the own funding purposes or for general economic support programs. For sovereigns in Asia during 2010, this could mean remaining active issuers in markets that they may otherwise like to tame, with the result of this balancing act being important for medium-term fiscal trends," said Hess.