Moody’s Investors Service has warned the Asia-Pacific Economic Cooperation (APEC) sovereigns, including the Philippines, of new challenges brought by the slow pace of recovery in the advanced economies.
In a special comment titled “Sovereign Ratings in APEC and Global Economic Challenges,” Moody’s stated that APEC sovereigns are facing several new challenges that have emerged in the wake of the 2008 crisis.
APEC is a forum for 21 Pacific Rim countries that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region.
“The slow pace of recovery in the advanced economies—with a subdued outlook for those in Europe and a modest recovery for that in the US—is constraining demand for the region’s exports, a key source of corporate profitability and economy-wide employment as well as income growth,” it explained.
Furthermore, Moody’s noted that “the resurgence of volatility in the global capital markets—in anticipation of the eventual unwinding of extraordinary monetary stimulus in the advanced economies—is clouding the outlook.”
However, it does not expect a balance-of-payments crises, not even in those countries whose exchange rates have faced the most pressures since May 2013.
The ratings agency also mentioned that the softening of growth in China after three decades of rapid expansion introduces “considerable uncertainty” to the outlook, given the increasing influence of China on economic cycles because of expanding trade ties throughout the region.
Despite this, Moody’s said that in the five years since the onset of the 2008 global financial crisis, the performance of the sovereign ratings of the members of the APEC has in general been of “stability and strength.”
It added that most of the APEC governments entered the crisis with small deficits, relatively low debt, and modest gross financing needs, and subsequently emerged with comparatively unscathed balance sheets.
Moody’s said that of the 20 rated member-sovereigns in APEC, 11 showed unchanged ratings between September 2008 and September 2013, while seven were upgraded, and only two were downgraded during this period of global financial crisis and economic recession.
“Nevertheless, underscoring the region’s resilience and stability, the ratings of 18 of the 20 member-sovereigns that we rate have stable outlooks, while Peru’s Baa2 carries a positive outlook and Philippines’ Ba1 is under review for upgrade,” it said.