MUMBAI (Thomson Financial) - Standard & Poor s Ratings Services said most Asia-Pacific sovereigns will face some challenges from the first-round effects of a US recession, while the likely second-round impacts could prolong or exacerbate the pressure.
In a report that examines the likely implications for the economies and credit fundamentals of governments in the region, it said domestic demand and intra-regional trade are expected to substantially counter the direct effects of falling US import demand. S&P, however, added that the Asia-Pacific economies will also have to contend with the risks posed by elevated energy and food prices, tight global liquidity, and the increasingly discussed possibility of European economies succumbing to the slowing growth momentum.
The unfolding global economic and financial conditions leave limited scope, if any, for rating upgrades in the region in the year ahead, the ratings agency said. It added that most regional sovereigns should weather the storm without negative rating action due to fairly robust endogenous growth prospects for the region as a whole, fiscal or monetary policy capacity to mitigate the impact, and solid donor support for the least developed sovereigns.
It also said the greatest risk stems not from the recession itself but from possible policy missteps by government when faced with the fallout of a US or possibly a global slowdown. TFN.newsdesk@thomson.com aka/man COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News. MMMM
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