Asia Pacific’s economic growth pace will stabilise in 2022, supporting a broad normalisation of credit conditions across sectors, said Moody’s recently.
That said, risks from the ongoing pandemic and other secular trends will remain, the credit rating agency added.
"The gradual recovery to pre-pandemic output levels in APAC will reflect the reopening of economies, underpinned by rising vaccination rates, continued monetary or fiscal support that will wind down only gradually, and robust external demand fueled by household spending, inventory restocking and global capital spending growth," said Nishad Majmudar, a Moody's Assistant Vice President and Analyst.
Nevertheless, Asia Pacific’s economic growth will see stark disparities across sectors and within the region because of countries’ different pandemic management, vaccination rates and secular trends, the firm pointed out.
Credit conditions will hinge on countries' capacity to control new virus variants and adapt to endemicity, policymakers' ability to maintain monetary or fiscal accommodation amid inflationary pressures, and the extent of international travel recovery, the firm noted.
Developments in the US (Aaa stable) and China (A1 stable) will also be important credit drivers, according to Moody’s.
A faster pace of monetary policy normalisation in the US would negatively affect issuers reliant on dollar financing and drive capital flow volatility, Moody’s said.
In China, any policy missteps in the country's efforts to contain the impact of its property sector downturn and address social and income inequality could weaken its economic growth, with implications for the region's economies, Moody’s warned.
Several secular trends will continue to present longer-term credit implications for Asian issuers, according to the company.
Automation, supply chain reconfiguration and geopolitical tensions in parts of the region will affect the technology and manufacturing sectors while an increased focus on carbon neutrality will be negative for the region's export economies that are unable to achieve their own decarbonisation goals, Moody’s said.
