Sovereign credit fundamentals resilient for Asia-Pacific: Moody's

Asia Pacific should remain resilient to both global headwinds during 2013 and the persistence of extraordinary easing by the US Federal Reserve, said Moody's Investors Service.

The rating agency foresees that sovereign credit profiles in the region will likely continue to improve relative to those in most other regions. In addition, although growth in the region is expected to remain flat at 5 per cent in 2013, it will continue to grow faster than any other region. While China’s growth has moderated, it should remain relatively robust in the near term.

Moody’s analysts today are in Bangkok for the discussion with Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong over Thailand’s macro-economic policies.

In the just-released "Asia-Pacific Sovereign Outlook 2013: Resilient to Global Headwinds", which covers the region’s advanced, emerging and frontier economies, Moody’s further expects growth in Asia-Pacific to pick-up only slightly over the near term, and remain below long-term averages in 2013 and 2014. This expectation is especially so with the large economies in the region. Notably, Moody’s expects China’s annual real GDP growth to remain at around 7.5 per cent and thus avoid a hard landing - although below the past decade’s average of 10 per cent.

For 2012 and 2013, Moody’s expects the region’s GDP-weighted average current account surplus to hover around 1% of GDP after having peaked at 5 per cent in 2007. As a result of this projected lower current account surplus, the growth of aggregated international reserves in the region, which amounted to roughly US$ 6.5 trillion as of September 2012, will slow further.

Nevertheless, Asia-Pacific will maintain its top position in terms of total reserves, which are projected at US$7 trillion by end-2013.

Leadership changes in the big three East Asian economies will be positive for pro-growth policies in the near term, although Japan in particular faces long-term challenges.