The credit trend for Asia Pacific’s non-financial firms is stable in 2023 said Moody’s recently.
However, slowing economic growth, persistent inflation and interest rate hikes, and geopolitical shifts will present challenges when it comes to the credit trend for Asia Pacific’s non-financial firms , Although commodity prices are normalising as supply chain problems ease, high energy and food prices remain core economic challenges for most countries, said Clara Lau, a Moody's Senior Vice President and Group Credit Officer.
“Meanwhile, interest rates will continue rising in the coming quarters as core inflation stays above most central banks' targets, before slowing in the latter part of the year,” Lau noted.
Moody's expects global economic growth to slow further to 0.2% for G-20 advanced economies and 3.1% for G-20 emerging economies in 2023, and has forecast real GDP growth for the US and China to slow to 0.4% and 4.0%, respectively.
Inflation and interest rates in the US will likely remain elevated for a while, and in China, a slow manufacturing and domestic consumption rebound, along with property sector weakness and export demand decline, will hinder its recovery, the firm added.
The share of ratings with a stable outlook in Moody's APAC corporate portfolio stood at 83% at the end of 2022, while the share of ratings with negative implications (meaning a negative outlook or a review for downgrade) was 13%, according to the credit rating agency.
Negative rating actions outpaced positive ones in 2022, with 136 negative actions compared with 44 positive actions, Moody’s said.
About 41% of the negative rating actions were taken on Chinese property developers, reflecting pressures from the tight funding environment, slowing economic growth and project incompletion risks, the firm added.
Ratings on all gaming issuers and 55% of property issuers have negative implications, but the Chinese government's recent relaxation of Covid policies and enhanced measures to improve funding accessibility for some property developers will alleviate pressure on the sectors, Moody’s noted.