Asia Pacific sovereign ratings can withstand Covid-19 waves: S&P

Singapore, Aug 23 : S&P Global Ratings believes low vaccination rates mean likely resurgences of new Covid cases in some parts of Asia Pacific in the next year or so.
Government measures to suppress new infections will weaken economic growth and fiscal metrics further. That is according to a report published on Monday titled 'Will Covid-19 Waves Wash Away Sovereign Credit Support In Asia-Pacific?'
"Covid-19 does limited damage to the economic growth trend and structural fiscal performance of most sovereigns in the region," said S&P Global Ratings credit analyst Kim Eng Tan.
"Consequently, most sovereign ratings in the region are likely to remain unchanged over the next one to two years," he said.
However, sovereigns' fiscal resilience to future shocks can weaken as government debt levels rise further in the continued struggle with the pandemic.
"The impact of further waves of Covid-19 infections could lower sovereign ratings that already have negative outlooks, especially if revenue growth disappoints and interest rates rebound by more than we expect," said Tan.
"It could also drag on the upward momentum of other sovereign ratings."
However, S&P said it does not expect these pressures to change the overall stability of Asia Pacific sovereign ratings. The analyses estimate the impact of two further waves of outbreaks over the next year.
The conclusions are derived from the amount of buffer these sovereign ratings have before falling to a lower level, it said.