The economic situation in Asia Pacific (APAC) is expected to improve greatly this year, supported by the gradual recovery of economic activities, given the early containment of the pandemic in several Asian economies, said Moody’s Investors Service. With the region being relatively close to ground-zero for the coronavirus, neighbouring nations were quick to implement strict measures to contain the spread of the pandemic.
In a recent report by Moody’s, the ongoing fiscal and monetary support in both the advanced and emerging markets will also aid in improving conditions but noted that renewed lockdowns in parts of the world have stalled the nascent global economic recovery and created uncertainty around improving credit conditions.
Moody’s group credit officer and senior vice-president Clara Lau said the rating trend for APAC corporates was overwhelmingly low last year, with the number of negative rating actions hitting a record high of 254, against a low of 30 positive actions during the year.
“That said, the negative rating trend somewhat abated in the second half of the year, with the share of ratings with negative implications improving to 26 percent at the end of last year, from a high of 29 percent in the second quarter of last year,” Lau said.
The firm also mentions that despite the easing in the negative rating trend this year, credit conditions for APAC corporates will likely differ on a sector-by-sector basis. Different regions will also likely see different results.
Moody’s also expects central banks to keep interest rates at a relatively low level to encourage spending by consumers and preventing the economy from stalling. Additionally, banks are expected to continue their provision of fiscal and monetary stimulus, including asset purchase programmes and lending facilities for banks to boost lending to the private sector.
It said these supportive measures will be credit-positive across sectors, as they will lower funding costs and support corporates’ debt repayment capacity, but companies with weak liquidity and/or high leverage will continue to face refinancing risk.
Ultimately, a successful economic recovery and continued improvement of credit trends will ultimately lie within individual governments’ ability to enact effective pandemic management.