Overall creditworthiness in the Asia Pacific (APAC) region, which includes the Philippines, is stable this year but US-China trade tensions could weigh on regional growth, according to Moody’s Investors Service.

“Our outlook for sovereign creditworthiness in Asia Pacific in 2019 is stable overall, reflecting our expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months,” it said in a report on Thursday.

The credit ratings agency observed that solid domestic fundamentals, including rising incomes and competitiveness, generally ample foreign exchange reserves and often sizeable domestic savings, would continue to underpin government credit quality region-wide.

In particular, it pointed out that elections in some sovereigns like the Philippines were unlikely to cause significant policy shifts.

“Local elections are due in Hong Kong, while the Philippines (Baa2 stable) will hold mid-term elections, with the entire lower house of Congress and half the Senate up for reelection, but there will be no leadership change. Consistent with our domestic political risk scores for these countries, we do not expect the elections to result in significant shifts in policies that would slow near-term economic activity, or alter sovereign credit quality,” Moody’s said.

However, it remarked that relations between the US and China were expected to swing between conflict and compromise, involving trade, investment, technology and geopolitics. This will weigh on exports and economic growth in APAC in the near term.

“We expect the pace of economic expansion in APAC to soften in 2019-20, with emerging and frontier market economies likely to experience the sharpest deceleration,” the credit rater said.

Median gross domestic product growth rates are estimated at 5.5 percent and 5.2 percent in 2019 for APAC emerging and frontier market economies respectively, while growth in the advanced economies will likely slow to 2.5 percent.

Finally, Moody’s highlighted that risks to the region’s medium-term growth prospects had also increased, given trade exposure to China and integration of manufacturing supply chains within the region.