Diverging recovery paths weigh on Asia Pacific credit conditions: S&P

Hong Kong, September 29 : Deepening divergence in the COVID-19 recovery is weighing on credit conditions in the Asia Pacific, S&P Global Ratings said on Tuesday.
Economic fallout has bottomed but the rebound is showing a big disparity among countries as well as sectors, potentially leading to widening variation in credit trends, it said in a report titled 'Credit Conditions Asia Pacific: Recovery Roads Diverge.'
"These differences in recovery rates in the Asia Pacific cut across the geographic, sector and borrower profiles," said S&P Global Ratings credit analyst Christopher Yip. "Lenders will remain selective, especially as tapering relief measures, including loan moratoriums, threaten to reveal masked difficulties."
Some early exiters such as China have already begun to tighten financial conditions, piling on stress for weaker borrowers. Other countries are still battling resurgence in COVID-19 infections yet have limited capacity to cushion the fallout with fiscal stimulus.
"While regional monetary settings remain accommodative overall, we see limited space for lowering policy rates further," said Yip.
Debt moratoriums, government guarantees and other stimulus programs are buying time. Once these fade out or expire the stickier difficulties may be unmasked. Governments could also be left with a heftier bill if they choose to extend these programmes in a prolonged pandemic scenario, said the S&P report.
S&P's forecast for Asia Pacific growth is minus 2 per cent in 2020 and 6.9 per cent in 2021. It revised down 2020 from minus 1.3 per cent as an earlier recovery in China is outweighed by a larger downside adjustment for India and most Southeast Asian countries.