SINGAPORE – Credit Rating Agency S&P  Global Ratings has said that low vaccination rates mean likely resurgences of new Covid-19 cases in some parts of Asia Pacific in the next year or so.

Government measures to suppress new infections will weaken economic growth and fiscal metrics further.

That is as per a  report  published on Aug. 23 titled “Will Covid-19 Waves Wash Away Sovereign Credit Support In Asia-Pacific?”

“Covid-19 does limited damage to the economic growth trend and structural fiscal performance of most sovereigns in the region,” said Kim Eng Tan, credit analyst at S&P Global Ratings.

“Consequently, most sovereign ratings in the region are likely to remain unchanged over the next one to two years.”

However, sovereigns’ fiscal resilience to future shocks can weaken as government debt levels rise further in the continued struggle with the pandemic.

“The impact of further waves of Covid-19 infections could lower sovereign ratings that already have negative outlooks, especially if revenue growth disappoints and interest rates rebound by more than we expect,” said Tan.

“It could also drag on the upward momentum of other sovereign ratings.”

However, S&P said it does not expect these pressures to change the overall stability of Asia Pacific sovereign ratings. The analyzes estimate the impact of two different waves of outbreaks over the next year.

The conclusions are derived from the amount of buffer these sovereign ratings have before falling to a lower level, it said.

The rating agency recently said that the rising Southeast Asian economies face intense headwinds from continuous Covid-19 pandemic waves.

“As a result, we are revising downward our 2021 growth expectations for a number of emerging Southeast Asia economies,” the report said. “The new lockdowns this year have been less costly as economies adapted to reduced mobility; the longer durations have meant that the economic costs are rising. Meanwhile, external demand will provide a buffer against further outlook deterioration.”

“A fresh slump in demand in emerging Southeast Asia is hitting sectors that have already faced a challenging year,” said Vishrut Rana, Asia Pacific economist at S&P Global Ratings.

“As the pandemic drags on, balance sheets will deteriorate for households, small and midsize enterprises, banks, and the wider economy, leading to more medium-run economic scarring.”

The report said that the new fiscal stimulus measures announced this year in southeast Asian economies have been more limited in scope, given that the fiscal policy space was significantly eroded during the initial pandemic escalation in 2020.

For India, the rating agency said that the country might see hurdles in the coming future for oil and coal as the country has been speeding up emission goals.

(With inputs from ANI)

Edited by Saptak Datta and Praveen Pramod Tewari

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