S&P sees bleak credit outlook for Asia-Pacific next year
"Mounting challenges across the globe could severely test the resilience of sovereigns in Asia-Pacific. The uncertainty over the sovereign debts and banking sector stability in the Eurozone is by far the biggest of these challenges," the S&P report said here on Tuesday.
Titled 'A slowdown in Europe & China, and sluggish exports moderate Asia-Pacific credit outlook in 2012' the report said the credit outlook in 2012 for the corporate sector in the region is generally stable with patches of weakness.
It also pointed out economic growth fundamentals and government fiscal positions in Asia-Pacific region are generally sound.
"The region, however, cannot remain immune to the problems in the advanced economies given that Europe is an important trading partner. Slowing growth in China will be another key issue to watch out for," the report added.
Referring to the capital inflows to these economies, the study said that volatile surges in capital inflows and rapid reversals are likely in this region prompting investors to vacillate between higher returns and increased safety.
"Surging capital flows may reignite inflationary pressures, distort currency values, and create asset bubbles in Asia-Pacific. Exports could also fall sharply as demand in the developed markets remains constrained. The risks are higher for Korea, Taiwan, and Singapore," the report said.
It, however, said growth in these economies will remain resilient despite the current challenges.
"Asia-Pacific's public and private infrastructure sectors are expected to expand in 2012. Strong demand, broad-based economic activity, significant ongoing capital expenditure requirements and favourable demographics should continue to fuel growth in several sectors," it said.