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Asia-Pacific Sovereign Rating Trends Midyear 2021

This report does not constitute a rating action.

Rating Outlook And Trends

Most Asia-Pacific sovereign credit ratings should remain unchanged in the next one to two years despite the continued pressures posed by COVID-19. S&P Global Ratings has stable outlooks on more than two-thirds of the 21 long-term sovereign ratings in the region currently. The average Asia-Pacific sovereign rating continues to lie between 'BBB' and 'BBB+'.

Effective vaccines reduce pandemic uncertainties and allow positive rating actions in early 2021

Fifteen Asia-Pacific sovereigns carry stable outlooks on their long-term credit ratings as of June 14, 2021. Of the remaining six government ratings, four have negative outlooks (Fiji, Indonesia, Malaysia, and Papua New Guinea) (see chart 3), while two (Taiwan and Vietnam) have positive outlooks.

COVID-19 vaccines, rolled out in several countries from late 2020, have helped to reduce pandemic-related uncertainties on the trends of economic and fiscal indicators. The better clarity has allowed a few positive rating actions in Asia-Pacific. The governments that benefited show strong credit metrics for their respective rating levels at the beginning of the year.

Chart 1

image

The foreign-currency long-term ratings on New Zealand and Taiwan were raised to 'AA+' and 'AA', respectively, with the positive outlook on the Taiwan ratings indicating continued upward momentum. We also revised the outlook on the 'BB' ratings on Vietnam to positive from stable in May and the outlook on the 'AAA' ratings on Australia to stable from negative in June.

The sole sovereign issuer to see negative rating action in the first six months of 2021 was Papua New Guinea. In April, the ratings on the sovereign were placed on CreditWatch with negative implications following news the government had rescheduled a debt that it had guaranteed. Further information regarding the government's financial position eased our concerns of an imminent credit event. Nevertheless, we assess that COVID-19 continues to put strong pressures on the government's fiscal metrics and believe that it could increase refinancing risk over time. Hence, the outlook on the long-term ratings was revised to negative in June when we removed the ratings from CreditWatch.

Chart 2

image

Rebounds In Infection Rates Still Possible In The Next One Year

We expect much of the Asia-Pacific to return to relatively strong economic performance once the region has COVID-19 under control. Many parts of the region have been significantly affected by the pandemic and have seen sharp economic contractions in 2020. However, we believe the episode has not seriously damaged their economic potential.

Even so, slow vaccine rollouts may drag on the recoveries of some parts of the region in the next year or so. Most Asia-Pacific countries are likely to receive enough vaccines for high inoculation rates only well into 2022, at the earliest. Meanwhile, governments may have to maintain social distancing measures to keep infection rates at tolerable levels. This limits the extent of economic and fiscal repair in the next year or so. But with visibility of when the pandemic could be brought under control, we can better grasp the downside scenarios for rating metrics.

A faster recovery in the advanced economies brings both benefits and risks to Asia-Pacific sovereigns. Higher vaccination rates in the U.S. and Europe allow social activity to begin to normalize and support demand for Asia-Pacific exports. When international travel resumes in the region, travelers from these advanced economies could also help to restart the regional tourism industry.

The recovery in the U.S. and Europe may pose risks for some borrowers in Asia-Pacific. Increasing demand has combined with supply, logistical and labor constraints in some sectors to raise prices. Most view the higher inflation of recent months as transitory. Still, if inflation persists near current levels, we see a rising risk of U.S. and European central banks normalizing monetary policy earlier than most currently expect. This could slow or reverse capital flows to emerging markets in the Asia-Pacific and cause funding costs to rise for some.

Chart 3

image

The continuing spread of the pandemic in many regions could also make existing vaccines less effective. The fast-spreading Delta variant of the disease appears to be more resistant to vaccines that are currently in use. We cannot rule out the appearance of newer variants that are even less affected by current vaccines. In this scenario, the pandemic could drag on and weigh on credit metrics more than we currently expect.

U.S.-China tensions likely to persist

There are few signs of a U.S.-China rapprochement anytime soon. Although the new U.S. administration has not yet rolled out new and significant economic measures against China, open disagreements between the two governments have increased over political issues. The increased international attention to cross-strait issues has been met by increasing Chinese military activities near Taiwan. Such activities increase the chances of accidental military conflicts that could spark economic and financial uncertainties for the region.

Regional growth prospects could also be hurt if Chinese policy reactions to external pressures intensify. Chinese policymakers have continued to push ahead with economic development and measures to reduce financial risks in the past few years. They have also not introduced major measures to impede the activities of foreign businesses so far. If the policy focus changes in a way that could hurt Chinese growth prospects or weaken financial stability, sovereign credit support for the government may weaken. Due to China's importance as a source of demand for the goods and services of neighboring countries, this could also have a spillover effect on other Asia-Pacific economies.

Prolonged pandemic could amplify domestic political uncertainties

Several Asia-Pacific countries could see recurring rebounds of new COVID-19 cases in the next year or so. Governments are likely to tighten social distancing measures when these rebounds occur. Although the economic impacts of these episodes are likely to be less negative than the lockdowns in 2020, disruptions to businesses and employment will still be significant.

These disruptions could fuel popular discontent with the performances of some governments in containing the pandemic. They are also likely to affect the livelihood of the lower-income group more than others, compounding the structural pressures that globalization and digital divide exert on social stability in parts of the Asia-Pacific. In regions where obvious social divisions exist, governments are likely to have reduced flexibility to implement policies needed to repair the balance sheet damage from the pandemic.

Table 1

Asia-Pacific Sovereign Rating Score Snapshot
Issuer Sovereign foreign currency ratings Institutional assessment Economic assessment External assessment Fiscal assessment, budget performance Fiscal assessment, debt Monetary assessment

Australia

AAA/Stable/A-1+ 1 1 5 2 2 1

Bangladesh

BB-/Stable/B 5 4 2 6 5 4

China

A+/Stable/A-1 3 3 1 4 2 3

Cook Islands

B+/Stable/B 5 4 5 5 1 6

Fiji

BB-/Negative/B 5 4 3 4 5 5

Hong Kong

AA+/Stable/A-1+ 3 1 1 1 2 2

India

BBB-/Stable/A-3 3 4 1 6 6 3

Indonesia

BBB/Negative/A-2 3 4 4 3 4* 3

Japan

A+/Stable/A-1 2 1 1 6 6 2

Korea

AA/Stable/A-1+ 3 1 1 1 4 2

Malaysia

A-/Negative/A-2 3 4 2 3 5 2

Mongolia

B/Stable/B 5 4 6 4 5 4

New Zealand

AA+/Stable/A-1+ 1 1 5 4* 2 1

Pakistan

B-/Stable/B 6 6 5 6 6 4

Papua New Guinea

B-/Negative/B 5 6 6 6 6 5

Philippines

BBB+/Stable/A-2 4 4 1 3 4* 3

Singapore

AAA/Stable/A-1+ 1 1 1 1 1 1

Sri Lanka

CCC+/Stable/C 5 5 6 6 6 4

Taiwan

AA/Positive/A-1+ 3 1 2 2

Thailand

BBB+/Stable/A-2 4 4 1 3 3 2

Vietnam

BB/Positive/B 4 4 3 4 4 4
% of sovereign with a score of 1 14 29 43 14 10 14
% of sovereign with a score of 2 5 5 10 10 24 29
% of sovereign with a score of 3 33 5 10 19 5 19
% of sovereign with a score of 4 14 48 5 24 19 24
% of sovereign with a score of 5 29 5 19 5 19 10
% of sovereign with a score of 6 5 10 14 29 24 5
Median 3 4 2 4 4 3
Mean 3.5 3.2 2.9 3.8 3.9 3.0
Standard Deviation 1.5 1.7 2.0 1.8 1.8 1.4
All data sourced from the most recent of the either the latest Research Update or Sovereign Risk Indicator publication. GDP and inflation data is taken from the economic snapshot reports for applicable sovereigns. *Deterioration since Dec 2020. §Improvement since Dec 2020.

Table 2

Asia Economic Outlook
Real GDP growth (%) GG balance / GDP (%) Net GG debt / GDP (%) Current account balance / GDP (%) Narrow net ext. debt / CAR (%)
2021 2022 2021 2022 2021 2022 2021 2022 2021 2022
Australia 1.3 3.7 (10.0) (5.3) 30.5 34.1 2.0 0.2 226.3 214.4
Bangladesh 4.7 7.3 (6.0) (5.5) 30.7 32.6 (0.4) (1.2) 42.0 44.3
China 8.3 5.1 (3.2) (3.0) 58.0 59.8 2.6 2.1 (50.4) (41.8)
Cook Islands (5.3) 8.6 (30.5) (6.4) 34.5 38.0 57.2 43.5 (33.2) (31.2)
Fiji 1.7 8.7 (13.0) (5.0) 74.1 71.3 (12.6) (7.7) 44.5 45.2
Hong Kong 6.5 2.5 (4.8) (1.8) (21.4) (18.6) 7.3 6.4 (59.6) (59.1)
India 9.5 7.8 (11.7) (9.5) 90.5 90.9 (0.1) (0.3) (15.9) (21.9)
Indonesia 4.4 5.2 (5.7) (4.2) 39.0 40.3 (1.1) (1.1) 121.7 112.9
Japan 3.7 1.7 (8.3) (5.5) 174.7 177.7 3.6 3.6 (100.3) (92.7)
Korea (the Republic of) 4.0 2.8 (4.1) (1.8) 12.9 14.1 5.1 4.5 (45.4) (47.7)
Malaysia 4.1 6.3 (5.3) (4.3) 71.2 70.8 2.9 2.9 28.7 25.9
Mongolia 6.0 7.5 (4.5) (3.5) 76.3 72.1 (6.3) (6.1) 161.6 145.5
New Zealand 1.8 2.9 (7.1) (5.0) 31.0 34.8 (2.2) (2.8) 190.5 173.2
Pakistan 3.0 3.3 (7.0) (6.1) 79.1 79.7 (1.4) (1.7) 160.8 152.9
Papua New Guinea 3.5 4.2 (4.0) (4.2) 43.8 45.5 15.7 13.1 124.2 131.3
Philippines 6.0 7.5 (7.5) (5.5) 41.7 43.4 2.3 1.2 (36.4) (38.7)
Singapore 6.2 3.8 (0.2) 1.0 (58.5) (56.2) 14.4 18.6 (90.9) (89.4)
Sri Lanka 3.7 4.0 (10.2) (9.3) 103.9 106.1 (1.9) (1.9) 166.8 162.0
Taiwan 5.6 2.7 (2.3) (0.9) 33.7 33.4 10.5 10.0 (113.1) (107.7)
Thailand 2.8 4.9 (3.5) (1.8) 41.0 40.5 1.5 2.7 (22.1) (14.5)
Vietnam 7.3 7.5 (4.5) (4.1) 34.5 35.3 1.7 1.1 18.8 16.8
f--Forecast. GG--General government. CAR--Current account receipts.

Sovereign Summaries

Australia (AAA/Stable/A-1+)

Unsolicited rating

Rating score snapshot:
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 5
  • Fiscal assessment – Flexibility and performance: 2
  • Fiscal assessment – Debt burden: 2
  • Monetary assessment: 1
Outlook: Stable

The stable outlook reflects our expectations that the general government fiscal deficits will narrow in line with our forecasts. We expect the budget to be supported by steady revenue growth, aided by robust commodity prices and expenditure restraint. We believe Australia's external accounts are likely to remain stronger than in the past and be resilient during potential crises.

Downside scenario

We could lower our ratings if we believe the general government deficit is unlikely to narrow over the next two to three years. This could occur if the economic recovery slows, there are prolonged lockdowns, the government implements substantial additional fiscal stimuli because of large unforeseen outbreaks, or commodity prices fall much faster and further than we expect. A sharp fall in commodity prices could reverse recent gains in Australia's external accounts.

Australia's weak external position means that its other sovereign credit factors, including the fiscal factors, need to be strong to keep the sovereign rating at the highest level on our scale. A stronger fiscal position would also be a strong buffer to absorb the consequences of an abrupt weakening of the housing market and the vulnerabilities such an event could bring to financial stability.

Table 3

Australia
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 56.7 50.0 54.0 57.4 55.1 51.8 60.3 65.6 68.5 71.0
GDP growth 2.2 2.8 2.3 3.0 2.2 (0.2) 1.3 3.7 3.4 2.4
GDP per capita growth 0.7 1.2 0.6 1.4 0.6 (1.5) 0.4 3.0 1.5 1.0
Current account balance/GDP (3.7) (4.7) (2.2) (2.8) (0.7) 1.8 2.0 0.2 0.3 0.3
Gross external financing needs/CAR&FXR 254.2 276.9 253.4 233.0 222.5 216.9 216.6 210.9 203.5 196.3
Narrow net external debt/CAR 266.5 318.2 270.7 257.9 244.4 258.8 226.3 214.4 202.8 186.3
GG balance/GDP (2.2) (2.4) (2.1) (1.0) (0.7) (6.8) (10.0) (5.3) (3.6) (2.6)
GG net debt/GDP 12.6 14.4 15.1 16.4 14.3 21.5 30.5 34.1 35.9 36.8
CPI inflation 1.7 1.4 1.7 1.9 1.7 1.3 1.5 1.9 2.2 2.3
Bank credit to resident private sector/GDP 150.7 158.1 157.0 155.9 153.0 175.5 170.0 167.7 164.0 161.7
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Bangladesh (BB-/Stable/B)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 4
  • External assessment: 2
  • Fiscal assessment – Flexibility and performance: 6
  • Fiscal assessment – Debt burden: 5
  • Monetary assessment: 4
Outlook: Stable

The stable outlook reflects our expectation that Bangladesh's solid growth path will continue raising average income and prevail over risks associated with the COVID-19 pandemic in the next 12 months.

Upside scenario

We may raise the ratings if the government materially improves its fiscal outcomes, including its very low revenue generation and increasing fiscal deficit.

Downside scenario

We may lower the ratings if fiscal and external debt metrics weaken further. We could also lower the ratings if external debt and financing metrics worsen materially, such that narrow net external debt surpasses 50% of current account receipts plus usable reserves, and gross external financing needs exceed 100% of current account receipts plus usable reserves, on a sustained basis.

Table 4

Bangladesh
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 1.2 1.4 1.5 1.7 1.9 2.0 2.2 2.4 2.7 3.0
GDP growth 6.6 7.1 7.3 7.9 8.2 5.2 4.7 7.3 7.1 7.1
GDP per capita growth 5.4 6.0 6.1 6.7 7.1 4.2 3.5 6.1 5.9 5.9
Current account balance/GDP 1.5 1.9 (0.5) (3.6) (1.5) (1.4) (0.4) (1.2) (1.4) (1.3)
Gross external financing needs/CAR&FXR 75.0 70.8 74.7 85.1 84.8 86.1 73.8 79.2 80.1 80.4
Narrow net external debt/CAR 13.6 12.0 17.4 33.9 42.5 36.0 42.0 44.3 45.5 45.1
GG balance/GDP (3.4) (3.7) (4.5) (5.6) (5.4) (5.4) (6) (5.5) (5) (4.7)
GG net debt/GDP 22.9 23.1 23.2 23.8 25.3 27.4 30.7 32.6 33.7 34.4
CPI inflation 6.2 5.5 5.7 5.5 5.6 5.7 6.0 6.0 6.0 6.0
Bank credit to resident private sector/GDP 45.7 46.6 48.8 48.5 47.1 46.1 47.1 46.9 46.6 46.4
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

China (A+/Stable /A-1)

Unsolicited rating

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 4
  • Fiscal assessment – Debt burden: 2
  • Monetary assessment: 3
Outlook: Stable

The stable outlook reflects our view that China will maintain above-average GDP growth over the next two to three years. This is despite headwinds from unpredictable pandemic developments and geopolitical risks. We also expect the country's fiscal performance to improve as policy support for the economy is cautiously dialed back and restrictions on off-budget borrowings of subnational government are maintained.

Downside scenario

A downgrade could ensue if we see an increased likelihood that China will allow higher credit growth to support economic expansion in an unsustainable manner. Such a trend could weaken the Chinese economy's resilience to shocks, limit the government's policy options, and increase the likelihood of a sharper decline in the trend GDP growth rate.

We could also lower the ratings if we believe China's fiscal performances could be materially weaker than our current projections, resulting in much higher government debt, in the next three to five years.

Upside scenario

We may raise our ratings on China if measures to restrict unsustainable growth in credit and off-budget borrowings are maintained. This will lower the fiscal deficit and stabilize the ratio of government debt to GDP. Such measures may improve our assessment of monetary policy credibility, as well as policymakers' ability to formulate and implement policies to promote balanced growth and sustainable fiscal performance.

Table 5

China
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 8.0 8.1 8.8 9.9 10.1 10.4 12.5 13.5 14.5 15.6
GDP growth 6.9 6.7 7.0 6.8 6.0 2.4 8.3 5.1 5.0 4.8
GDP per capita growth 6.4 6.0 6.4 6.4 5.6 2.2 8.1 4.9 4.8 4.6
Current account balance/GDP 2.7 1.7 1.5 0.2 0.7 1.9 2.6 2.1 1.5 1.1
Gross external financing needs/CAR&FXR 56.0 53.7 59.7 67.1 68.5 64.9 67.3 71.5 75.0 78.2
Narrow net external debt/CAR (101.7) (97.8) (83.7) (70) (70.4) (66.9) (50.4) (41.8) (34.2) (26.6)
GG balance/GDP (2.3) (2.8) (2.4) (2.8) (4.3) (3.7) (3.2) (3) (2.8) (2.8)
GG net debt/GDP 42.4 47.4 46.7 46.9 48.9 56.9 58.0 59.8 59.5 59.1
CPI inflation 1.4 2.0 1.6 2.1 2.9 2.5 1.8 2.1 2.2 2.2
Bank credit to resident private sector/GDP 168.0 182.3 180.1 186.0 190.4 206.2 204.2 212.4 218.7 225.5
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Cook Islands (B+/Stable/B)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 4
  • External assessment: 5
  • Fiscal assessment – Flexibility and performance: 5
  • Fiscal assessment – Debt burden: 1
  • Monetary assessment: 6
Outlook: Stable

The stable outlook on the long-term ratings on the Cook Islands reflects our expectation that the country will narrow its fiscal deficits, thereby slowing the rise in net debt over the next few years.

Downside scenario

We could lower our ratings if the effects of the pandemic were greater or more prolonged than we currently expect. This could cause public finances to underperform our forecasts with large deficits and higher net debt.

Upside scenario

We could raise our ratings over the next 12 months if there is a sustained improvement in data disclosure and quality, leading to increased transparency about the country's external liquidity and indebtedness.

Table 6

Cook Islands
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 23.7 23.5 25.8 28.4 28.7 26.0 26.8 29.7 32.6 35.9
GDP growth 4.8 5.5 6.8 8.9 5.3 (5.9) (5.3) 8.6 9.4 9.4
GDP per capita growth 9.6 9.8 5.9 8.1 4.5 (6.6) (6) 7.7 8.6 8.6
Current account balance/GDP 22.7 36.3 16.7 35.3 34.2 47.1 57.2 43.5 39.1 35.3
Gross external financing needs/CAR&FXR N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Narrow net external debt/CAR (4.5) (10.3) (20.4) (24.3) (40.1) (39.0) (33.2) (31.2) (28.9) (27.2)
GG balance/GDP (4.6) (1.7) 6.8 4.1 5.0 (6.0) (30.5) (6.4) (0.4) (0.4)
GG net debt/GDP 12.7 7.5 (0.3) (7.5) (2.7) 3.8 34.5 38.0 34.9 32.2
CPI inflation 5.3 (0.1) (0.1) 0.4 0.0 0.7 1.5 2.0 2.0 2.0
Bank credit to resident private sector/GDP 61.7 52.3 50.2 45.9 41.8 45.2 49.4 47.1 44.5 42.1
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Fiji (BB-/Negative/B)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 4
  • External assessment: 3
  • Fiscal assessment – Flexibility and performance: 4
  • Fiscal assessment – Debt burden: 5
  • Monetary assessment: 5
Outlook: Negative

The negative outlook reflects uncertainty around the duration of the pandemic and its effect on Fiji's crucial tourism sector. We consider economic and fiscal risks to be tilted to the downside.

Downside scenario

We could lower our ratings on Fiji during the next 12 months if the pandemic and associated travel restrictions are more severe than we presently expect. This could induce a deeper, more prolonged recession and result in wider fiscal deficits.

Upside scenario

We could revise our outlook on Fiji to stable during the next 12 months if the risks of a more severe pandemic and recession were to subside, allowing the tourism sector to recover and public finances to stabilize. We could also revise our outlook to stable if we observe continued improvement in Fiji's institutional and policy settings, providing greater support for sustainable finances and balanced economic growth in the medium term.

Table 7

Fiji
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 5.4 5.7 6.1 6.3 6.1 4.9 5.4 6.0 6.5 7.0
GDP growth 4.5 2.4 5.4 3.8 (0.5) (19.1) 1.7 8.7 6.5 4.8
GDP per capita growth 4.1 2.0 3.7 3.2 (1.0) (19.5) 1.1 8.1 5.9 4.2
Current account balance/GDP (3.5) (3.6) (6.7) (8.4) (12.6) (13.8) (12.6) (7.7) (5.8) (4.2)
Gross external financing needs/CAR&FXR 98.6 98.9 100.4 101.4 112.0 111.0 109.0 108.9 105.9 101.8
Narrow net external debt/CAR (1.7) (6.6) (7.3) 6.5 12.7 31.7 44.5 45.2 43.7 37.7
GG balance/GDP (3.8) (1.3) (1.9) (4.3) (3.5) (8.8) (13.0) (5.0) (2.9) (2.8)
GG net debt/GDP 40.7 38.8 36.1 40.1 43.7 64.6 74.1 71.3 67.2 64.2
CPI inflation 1.4 3.9 3.4 4.1 1.8 (2.6) 2.5 3.0 3.0 3.0
Bank credit to resident private sector/GDP 66.0 69.3 70.3 71.1 72.7 89.7 88.2 83.5 81.1 80.0
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Hong Kong (AA+/Stable/A-1+)

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 1
  • Fiscal assessment – Debt burden: 2
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our expectation that the fiscal slippage seen this year will not persist over the next two years. It also reflects our expectation that Hong Kong's autonomy in setting economic policies, as laid out in the Basic Law, will be upheld, and that changes in relations between the U.S. and Hong Kong will not materially weaken the territory's financial sector, public finances, and economic growth prospects.

Downside scenario

We could lower the ratings due to a number of factors, such as events that affect Hong Kong's economic stability or policy predictability. We could also consider a downgrade if the government depletes fiscal reserves at a much faster pace than we currently anticipate.

Upside scenario

We could consider an upgrade if Hong Kong's policy environment improves materially, enhancing social and political stability, and strengthening public finances. We could also raise our ratings if the central government's credit standing improves.

Table 8

Hong Kong
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 42.4 43.7 46.2 48.5 48.4 46.3 49.6 51.7 53.6 55.2
GDP growth 2.4 2.2 3.8 2.9 (1.7) (6.1) 6.5 2.5 2.0 1.9
GDP per capita growth 1.5 1.5 3.0 2.0 (2.4) (5.8) 6.3 2.2 1.5 1.4
Current account balance/GDP 3.3 4.0 4.6 3.7 5.9 6.5 7.3 6.4 5.7 4.6
Gross external financing needs/CAR&FXR 184.8 182.9 175.2 177.8 188.3 187.6 181.6 187.8 191.1 192.4
Narrow net external debt/CAR (59.7) (69.9) (65.5) (59.1) (62.8) (72.7) (59.6) (59.1) (51.6) (44.1)
GG balance/GDP 0.6 4.5 5.6 2.4 (0.6) (9.4) (4.8) (1.8) (1.5) (1.5)
GG net debt/GDP (30.1) (31.9) (36.0) (35.3) (36) (28.2) (21.4) (18.6) (16.4) (14.3)
CPI inflation 3.0 2.4 1.5 2.4 2.9 0.3 2.4 2.0 1.8 1.7
Bank credit to resident private sector/GDP 210.4 219.0 237.6 232.7 248.8 267.8 258.9 259.3 261.4 265.0
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

India (BBB-/Stable/A-3)

Unsolicited rating

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 4
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 6
  • Fiscal assessment – Debt burden: 6
  • Monetary assessment: 3
Outlook: Stable

The stable outlook reflects our expectation that India's economy will recover following the resolution of the COVID-19 pandemic, and that the country's strong external settings will act as a buffer against financial strains despite elevated government funding needs over the next 24 months.

Downside scenario

We may lower the ratings if: (1) India's economy recovers significantly slower than we expect from fiscal 2021 onwards; or (2) net general government deficits and the associated accumulation of indebtedness materially exceed our forecasts, signifying a weakening of India's institutional capacity to maintain sustainable public finances.

Upside scenario

We may raise the ratings if the Indian economy exhibits a stronger recovery than we expect over the next 24 months, such that the country's long-term growth outperformance is intact and its fiscal metrics dramatically improve.

Table 9

India
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 1.6 1.7 2.0 2.0 2.1 1.9 2.2 2.4 2.6 2.8
GDP growth 8.0 8.3 6.8 6.5 4.0 (7.3) 9.5 7.8 5.7 6.5
GDP per capita growth 6.8 7.1 5.7 5.4 3.0 (8.2) 8.5 6.8 4.8 5.6
Current account balance/GDP (1.1) (0.6) (1.8) (2.1) (0.9) 0.9 (0.1) (0.3) (0.7) (1.0)
Gross external financing needs/CAR&FXR 88.9 87.5 90.3 89.4 88.2 78.1 76.1 74.2 72.9 72.7
Narrow net external debt/CAR 16.1 10.6 9.5 11.1 2.8 (9.8) (15.9) (21.9) (26.2) (28.9)
GG balance/GDP (7.4) (7.4) (6.7) (6.6) (7.6) (14.2) (11.7) (9.5) (9) (8.7)
GG net debt/GDP 68.5 68.7 70.2 71.3 74.1 90.2 90.5 90.9 91.3 91.7
CPI inflation 4.9 4.5 3.6 3.4 4.8 6.2 5.3 4.5 4.5 4.3
Bank credit to resident private sector/GDP 53.9 52.0 51.5 52.8 52.2 57.8 56.8 57.6 58.4 58.8
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Indonesia (BBB/Negative/A-2)

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 4
  • External assessment: 4
  • Fiscal assessment – Flexibility and performance: 3
  • Fiscal assessment – Debt burden: 4
  • Monetary assessment: 3
Outlook: Negative

The negative outlook reflects our expectation that Indonesia will face sustained fiscal and external pressures related to the COVID-19 pandemic over the next 12-24 months.

Downside scenario

We may lower the rating if the recovery in Indonesia's economic growth stalls such that the government's fiscal position worsens beyond our current projections, or its external metrics do not improve as we forecast.

A slower recovery in Indonesia's current account receipts leading to a weaker recovery in Indonesia's external balance sheet than we expect would be an indication of further downward pressure on the rating.

Indications that the government's fiscal deficits, and the associated change in net general government debt, will surpass 4% of GDP on a more sustained basis following the pandemic would also result in downward pressure.

Upside scenario

We may revise the outlook to stable if Indonesia's net external indebtedness falls below its annual current account receipts.

We may also revise the outlook if (1) Indonesia's fiscal settings improve such that the general government deficit and the associated change in net debt fall well below 3.0% of GDP over the next one to two years; and (2) net general government debt falls below 30% of GDP, or the government's interest expenditure declines to below 10% of its annual revenues.

Table 10

Indonesia
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 3.3 3.6 3.8 3.9 4.1 3.9 4.2 4.4 4.7 5.0
GDP growth 4.9 5.0 5.1 5.2 5.0 (2.1) 4.4 5.2 5.3 4.8
GDP per capita growth 3.6 3.8 3.8 4.0 3.9 (3.1) 3.5 4.4 4.1 4.1
Current account balance/GDP (2.0) (1.8) (1.6) (2.9) (2.7) (0.5) (1.1) (1.1) (1.4) (1.6)
Gross external financing needs/CAR&FXR 93.8 94.2 92.1 95.9 98.2 88.6 90.7 90.6 88.9 87.5
Narrow net external debt/CAR 102.5 103.6 97.3 102.1 116.9 134.4 121.7 112.9 102.2 92.7
GG balance/GDP (2.6) (2.5) (2.5) (1.7) (2.2) (6.2) (5.7) (4.2) (3) (2.7)
GG net debt/GDP 25.1 26.1 26.2 27.2 27.6 35.8 39.0 40.3 40.2 39.9
CPI inflation 3.4 3.0 3.6 3.1 2.8 2.0 2.2 2.7 2.7 2.8
Bank credit to resident private sector/GDP 37.3 37.9 37.4 38.5 38.1 38.4 37.3 37.9 38.4 39.1
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Japan (A+/Stable/A-1)

Unsolicited rating

Rating score snapshot:
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 6
  • Fiscal assessment – Debt burden: 6
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our expectations of steady trends in Japanese sovereign credit metrics on the back of a relatively gradual economic recovery. Over the next four years, we expect Japan's average nominal GDP growth to be unexceptional among high-income economies, at about 1.8% annually. The modest pace of economic recovery will likely also slow the momentum of government revenue growth, while spending pressures on social services and national defense will continue to grow. We expect that these factors will keep annual general government deficits at levels at or above 5% of GDP for much of the next three years.

Downside scenario

We may lower the ratings on Japan if future developments lead to economic growth that persistently lags that of other high-income economies and a return of deflation puts long-term pressure on fiscal performance.

Upside scenario

We may raise the ratings on Japan if we come to believe fiscal repair will proceed significantly faster than we currently anticipate. In this scenario, we would expect the general government deficit to fall persistently below 4% of GDP annually, allowing the net general government debt level to stabilize or decline relative to nominal GDP. We could also raise the sovereign rating if we believe monetary policy credibility has improved and expectations of low, positive, and stable inflation are well-entrenched in Japan.

Table 11

Japan
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 35.2 39.5 39.1 39.9 40.7 40.0 42.3 43.1 44.2 45.2
GDP growth 1.7 0.8 1.8 0.3 (0.3) (4.8) 3.7 1.7 0.9 0.9
GDP per capita growth 1.7 0.9 2.0 0.5 (0.1) (4.4) 4.2 1.9 1.4 1.3
Current account balance/GDP 3.1 3.9 4.1 3.5 3.7 3.3 3.6 3.6 3.4 3.6
Gross external financing needs/CAR&FXR 157.1 158.0 172.1 168.6 180.2 187.7 197.5 194.7 192.7 190.3
Narrow net external debt/CAR (134.3) (121.8) (107.6) (80.5) (87.5) (112.5) (100.3) (92.7) (86.3) (80.3)
GG balance/GDP (3.6) (3.5) (2.9) (2.4) (3.1) (15.5) (8.3) (5.5) (5.1) (4.5)
GG net debt/GDP 143.7 145.3 144.6 146.9 149.7 171.7 174.7 177.7 180.8 182.8
CPI inflation 0.8 (0.1) 0.5 0.9 0.5 0.0 0.0 0.5 0.8 0.9
Bank credit to resident private sector/GDP 138.8 141.9 145.3 147.1 153.1 162.9 161.1 162.0 163.3 164.3
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Republic of Korea (AA/Stable/A-1+)

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 1
  • Fiscal assessment – Debt burden: 4
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our expectation that Korea will shake off the impact of COVID-19 over the next two to three years to return to growth rates higher than most other high-income economies. Over this time, we also anticipate the general government deficit will shrink and return to a surplus from 2023. We believe geopolitical risks on the Korean peninsula will not escalate to the point of hurting the country's economic fundamentals over the next two years.

Downside scenario

We would lower the ratings if we believe that geopolitical tensions related to North Korea will intensify to a point that they seriously damage Korea's economic, fiscal, or external performance.

Upside scenario

We may raise the sovereign ratings if the security risks and contingent liability risks posed by North Korea recede.

Table 12

Korea
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 28.7 29.3 31.6 33.4 31.9 31.5 35.8 37.7 40.0 42.4
GDP growth 2.8 3.0 3.2 2.9 2.0 (1.0) 4.0 2.8 2.5 2.5
GDP per capita growth 2.3 2.5 2.9 2.4 1.8 (1.1) 3.5 3.1 2.5 2.5
Current account balance/GDP 7.2 6.5 4.6 4.5 3.6 4.6 5.1 4.5 4.9 5.2
Gross external financing needs/CAR&FXR 69.6 68.3 72.5 73.5 75.1 72.9 75.0 73.3 71.8 70.4
Narrow net external debt/CAR (33.8) (46.5) (49.0) (45.2) (49.3) (51.4) (45.4) (47.7) (48.6) (50.2)
GG balance/GDP 1.2 2.5 2.6 3.1 0.9 (3.3) (4.1) (1.8) 0.7 2.0
GG net debt/GDP 9.2 9.2 6.5 6.4 5.3 9.3 12.9 14.1 12.7 10.0
CPI inflation 0.7 1.0 1.9 1.5 0.4 0.5 1.7 1.5 1.4 1.4
Bank credit to resident private sector/GDP 147.8 147.6 147.5 151.7 159.5 174.4 173.7 171.7 169.9 168.4
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Malaysia (A-/Negative/A-2)

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 4
  • External assessment: 2
  • Fiscal assessment – Flexibility and performance: 3
  • Fiscal assessment – Debt burden: 5
  • Monetary assessment: 2
Outlook: Negative

The negative outlook reflects our expectation that Malaysia faces heightened risks to its fiscal and economic recovery prospects over the next 12-24 months related to the COVID-19 pandemic and domestic political uncertainty.

Downside scenario

Our ratings on Malaysia could face downward pressure over the next 12-24 months if economic growth suffers a deeper or more prolonged downturn than we expect, or if we see a weaker commitment to fiscal consolidation. Both these situations could result in the faster accumulation of net general government debt. Change in net general government debt surpassing 4% on a sustained basis, net indebtedness surpassing 80% of GDP, or interest paid by the general government exceeding 15% of revenue would indicate such deterioration.

Downward ratings pressure could also build if political stability in Malaysia deteriorates such that policymaking becomes materially less predictable, or if the country's external position weakens such that the economy's annual gross external financing needs surpass current account receipts plus usable reserves.

Upside scenario

We may revise the outlook to stable over the next 12-24 months if the Malaysian economy grows considerably faster than we forecast, or the policy environment becomes more conducive to credible fiscal consolidation. This would in turn produce a stronger fiscal performance than we expect, leading to a quicker stabilization of government finances.

Table 13

Malaysia
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 9.7 9.5 10.0 11.1 11.2 10.3 11.1 11.8 12.4 13.1
GDP growth 5.1 4.5 5.8 4.8 4.3 (5.6) 4.1 6.3 5.0 4.7
GDP per capita growth 3.5 3.0 4.5 3.6 3.7 (5.8) 2.8 5.0 3.8 3.5
Current account balance/GDP 3.0 2.4 2.8 2.2 3.4 4.4 2.9 2.9 3.1 3.3
Gross external financing needs/CAR&FXR 86.3 94.2 95.0 94.8 95.6 93.6 93.9 94.1 93.6 92.6
Narrow net external debt/CAR 21.1 28.9 25.5 25.0 28.7 32.8 28.7 25.9 23.3 20.2
GG balance/GDP (2.9) (2.6) (2.4) (2.7) (2.2) (5.2) (5.3) (4.3) (3.2) (3)
GG net debt/GDP 48.6 47.3 55.1 56.2 59.0 69.3 71.2 70.8 69.9 69.0
CPI inflation 2.1 2.1 3.9 0.9 0.7 (1.1) 3.3 2.1 2.1 2.1
Bank credit to resident private sector/GDP 132.8 132.4 127.2 131.1 131.8 145.8 144.9 142.7 141.9 141.2
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Mongolia (B/Stable/B)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 4
  • External assessment: 6
  • Fiscal assessment – Flexibility and performance: 4
  • Fiscal assessment – Debt burden: 5
  • Monetary assessment: 4
Outlook: Stable

The stable outlook reflects our expectation that the economic shock from COVID-19 will be temporary and that economic growth will rebound over the next 12 months, leading to a stabilization in Mongolia's external, fiscal, and debt metrics.

Downside scenario

Downward pressure could emerge if the economic slowdown is sharper and more protracted than we expect, leading to a material deterioration in Mongolia's real GDP growth and its fiscal or debt metrics. Likewise, a disruption in access to external financing could also lead to downward pressure on the rating.

Upside scenario

We could raise the rating if the economy outperforms our current projections over the next 12 months such that fiscal, debt, or external metrics improve more rapidly than we expect.

Table 14

Mongolia
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 3.8 3.6 3.6 4.1 4.3 4.0 4.3 4.7 5.0 5.5
GDP growth 2.5 1.4 5.4 7.0 5.0 (5.4) 6.0 7.5 6.5 6.0
GDP per capita growth 0.5 (0.6) 3.5 5.1 3.2 (7.1) 4.2 5.7 4.8 4.3
Current account balance/GDP (8.1) (6.3) (10.1) (16.8) (15.4) (5.1) (6.3) (6.1) (6.4) (6.5)
Gross external financing needs/CAR&FXR 140.7 146.2 149.4 130.6 123.6 104.9 90.6 111.5 108.1 104.5
Narrow net external debt/CAR 178.2 252.1 223.3 181.0 166.0 170.3 161.6 145.5 130.8 116.2
GG balance/GDP (8.5) (15.3) (3.8) 2.6 1.0 (9.5) (4.5) (3.5) (2.5) (2.5)
GG net debt/GDP 66.7 94.1 85.5 74.7 64.5 79.1 76.3 72.1 67.9 64.2
CPI inflation 5.7 0.7 4.3 6.8 7.3 3.7 5.0 5.5 5.5 5.5
Bank credit to resident private sector/GDP 55.6 56.4 55.0 57.2 51.0 48.6 48.6 47.3 46.5 45.8
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

New Zealand (AA+/Stable/A-1+)

Rating score snapshot:
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 5
  • Fiscal assessment – Flexibility and performance: 4
  • Fiscal assessment – Debt burden: 2
  • Monetary assessment: 1
Outlook: Stable

The stable outlook reflects our expectations that there is ample headroom within the current 'AA+' rating to provide the country with the flexibility to address potential risks associated with its high levels of external debt, its high private-sector debt, and rising property prices that could present risks to the stability of its financial system.

Downside scenario

We could lower our ratings on New Zealand if the fiscal deficits are substantially weaker than our forecasts, driving debt and interest expenses higher. This would reduce the government's headroom at the current rating to address potential macroeconomic and financial sector risks, should they materialize.

Upside scenario

We could raise our ratings if New Zealand's fiscal indicators strengthen markedly or if external imbalances improve.

Table 15

New Zealand
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 41.6 36.9 41.1 43.4 42.0 39.8 45.9 49.5 52.1 54.1
GDP growth 4.1 3.8 3.5 3.7 2.9 (1.8) 1.8 2.9 2.9 2.9
GDP per capita growth 2.1 1.6 1.3 1.7 1.2 (3.8) 4.9 0.5 2.2 1.9
Current account balance/GDP (3.4) (2.2) (2.7) (3.5) (3.7) (1.8) (2.2) (2.8) (2.6) (2.6)
Gross external financing needs/CAR&FXR 207.0 200.2 202.0 195.6 189.7 197.7 194.8 209.4 204.6 205.2
Narrow net external debt/CAR 164.4 188.9 182.0 160.0 162.3 169.8 190.5 173.2 158.1 153.9
GG balance/GDP (1.1) (0.7) 0.8 0.4 (0.7) (7.7) (7.1) (5.0) (3.4) (2.0)
GG net debt/GDP 20.2 20.0 18.6 17.9 18.2 25.5 31.0 34.8 36.3 36.6
CPI inflation 0.6 0.3 1.4 1.5 1.7 1.8 2.3 2.3 2.1 2.0
Bank credit to resident private sector/GDP 157.6 160.5 160.6 157.3 158.4 166.5 165.0 167.5 167.3 168.4
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Pakistan (B-/Stable/B)

Rating score snapshot:
  • Institutional assessment: 6
  • Economic assessment: 6
  • External assessment: 5
  • Fiscal assessment – Flexibility and performance: 6
  • Fiscal assessment – Debt burden: 6
  • Monetary assessment: 4
Outlook: Stable

The stable outlook reflects our expectations that donor and partner financing will ensure that Pakistan can meet its external obligations over the next 12 months, and that the country will continue to roll over its commercial credit lines.

Downside scenario

We may lower our ratings if Pakistan's fiscal, economic, or external indicators deteriorate further, such that the government's external debt repayments come under pressure. Indications of this would include external or fiscal imbalances higher than what we expect.

Upside scenario

Conversely, we may raise our ratings on Pakistan if the economy materially outperforms our expectations, strengthening the country's fiscal and external positions more quickly than forecast.

Table 16

Pakistan
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 1.4 1.4 1.6 1.6 1.4 1.3 1.3 1.4 1.5 1.5
GDP growth 4.1 4.6 5.2 5.5 1.9 (0.4) 3.0 3.3 3.5 3.5
GDP per capita growth 1.9 2.4 3.6 3.4 (0.1) (1.8) 1.0 1.3 1.5 1.5
Current account balance/GDP (1.0) (1.8) (4.0) (6.1) (4.8) (1.7) (1.4) (1.7) (1.9) (1.9)
Gross external financing needs/CAR&FXR 108.2 105.9 112.6 131.6 147.6 143.2 126.6 127.5 124.1 120.6
Narrow net external debt/CAR 82.9 92.9 111.2 138.3 161.2 167.4 160.8 152.9 148.6 142.7
GG balance/GDP (5.3) (4.6) (5.8) (6.5) (9.1) (8.1) (7) (6.1) (5.3) (5)
GG net debt/GDP 56.5 59.0 59.4 64.1 74.9 76.7 79.1 79.7 80.0 80.0
CPI inflation 4.5 2.9 4.2 3.9 7.3 11.7 6.5 6.0 6.0 6.0
Bank credit to resident private sector/GDP 17.0 18.1 19.6 21.1 21.9 20.7 19.8 19.9 20.2 20.6
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Papua New Guinea (B-/Negative/B)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 6
  • External assessment: 6
  • Fiscal assessment – Flexibility and performance: 6
  • Fiscal assessment – Debt burden: 6
  • Monetary assessment: 5
Outlook: Negative

The negative outlook reflects a one-in-three chance of a downgrade over the next 12 months due to PNG's weak fiscal position and rapidly increasing debt levels. The negative outlook also reflects the risk of wider external financing gaps in the near term. These developments have increased the refinancing risks that the government faces and likely contributed to its decision to refinance the Eda Kopa (Solwara) debt rather than repay it.

We could revise the outlook to stable if the effect of the current pandemic is less damaging to public finances than we expect. Such an improvement could stem from the implementation of fiscal reforms, strengthening PNG's tax revenues, on the back of a stronger-than-expected economic recovery.

Table 17

Papua New Guinea
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 2.7 2.5 2.7 2.8 2.8 2.7 2.7 2.8 2.8 2.9
GDP growth 6.6 5.5 3.5 (0.3) 5.9 (3.9) 3.5 4.2 2.5 2.6
GDP per capita growth 4.5 3.4 1.5 (2.2) 3.9 (5.7) 1.3 2.1 0.3 0.5
Current account balance/GDP 20.3 24.9 23.5 22.6 22.2 17.1 15.7 13.1 10.8 8.2
Gross external financing needs/CAR&FXR 79.8 72.5 97.1 81.3 81.0 85.3 78.4 87.8 89.4 98.3
Narrow net external debt/CAR 207.6 177.9 133.7 122.7 103.4 98.8 124.2 131.3 153.8 175.0
GG balance/GDP (4.6) (4.7) (2.5) (2.6) (5.0) (4.2) (4) (4.2) (4.1) (4.2)
GG net debt/GDP 24.5 29.5 29.5 27.6 36.3 41.8 43.8 45.5 47.5 49.5
CPI inflation 6.0 6.7 5.4 4.7 3.6 3.3 4.7 4.0 3.2 3.2
Bank credit to resident private sector/GDP 21.7 21.3 18.9 18.3 18.2 19.4 19.3 18.7 18.4 18.1
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Philippines (BBB+/Stable/A-2)

Rating score snapshot:
  • Institutional assessment: 4
  • Economic assessment: 4
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 3
  • Fiscal assessment – Debt burden: 4
  • Monetary assessment: 3
Outlook: Stable

The stable outlook reflects our expectation that the Philippines economy will recover to healthy rates of growth as the COVID-19 pandemic is better contained, and that the government's fiscal performance will materially improve.

Downside scenario

We may lower the rating if the Philippines' nascent economic recovery falters over the next 24 months, leading to a significant erosion of the country's long-term trend growth rate, or an associated deterioration of the government's fiscal and debt positions beyond our projections. Indications of downward pressure on the rating would be a sustained annual change in net general government debt higher than 4% of GDP and the general government's net debt stock exceeding 60% of GDP, or interest payments exceeding 15% of revenues on a sustained basis.

Upside scenario

We may raise the rating over the next two years if the economy recovers much faster than we expect, and the government achieves more rapid fiscal consolidation. We may also raise the rating if the institutional settings, which have contributed to a significant enhancement in the Philippines' pre-pandemic credit metrics over the past decade, further improve.

Table 18

Philippines
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 3.0 3.1 3.2 3.3 3.5 3.3 3.6 3.9 4.3 4.7
GDP growth 6.4 7.2 6.9 6.3 6.0 (9.5) 6.0 7.5 7.3 7.5
GDP per capita growth 4.8 5.4 5.3 4.8 4.5 (10.8) 6.5 5.8 5.8 5.8
Current account balance/GDP 2.4 (0.4) (0.7) (2.6) (0.8) 3.6 2.3 1.2 0.1 (0.5)
Gross external financing needs/CAR&FXR 63.9 67.9 70.4 74.0 73.8 60.8 59.1 59.6 61.9 64.0
Narrow net external debt/CAR (20.8) (25.4) (25.1) (18.6) (24.9) (36.5) (36.4) (38.7) (36.2) (32.6)
GG balance/GDP 0.9 (0.6) (0.5) (1.5) (1.8) (7.1) (7.5) (5.5) (3.6) (3.1)
GG net debt/GDP 26.8 27.5 27.9 28.0 28.9 38.5 41.7 43.4 43.1 42.5
CPI inflation 0.7 1.3 2.9 5.2 2.5 2.6 4.5 2.2 2.2 2.5
Bank credit to resident private sector/GDP 46.8 49.7 52.9 55.0 55.6 59.6 61.0 63.8 66.8 70.1
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Singapore (AAA/Stable/A-1+)

Unsolicited rating

Rating score snapshot:
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 1
  • Fiscal assessment – Debt burden: 1
  • Monetary assessment: 1
Outlook: Stable

The stable outlook reflects our expectation that the Singapore economy has bottomed out and the ongoing recovery is likely to gain traction on the back of wider vaccination rollout. Despite the unprecedented economic shock, Singapore's strong economic fundamentals, fiscal, and external settings have remained intact.

Downside scenario

The ratings could come under pressure if the ongoing economic recovery falters, leading to a material shift in Singapore's credit metrics and a deterioration of the policy environment. However, in our view, Singapore's deep fiscal resources and its strong institutions should be able to address such temporary shocks and mitigate structural damage to the economy. Therefore, we consider a downgrade in the next two years as improbable.

Table 19

Singapore
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 55.7 56.9 61.2 66.7 65.6 59.8 64.7 67.2 70.1 72.7
GDP growth 3.0 3.3 4.5 3.5 1.4 (5.4) 6.2 3.8 2.8 2.6
GDP per capita growth 1.8 2.0 4.4 3.0 0.2 (5.1) 4.3 2.4 2.0 2.0
Current account balance/GDP 18.7 17.6 17.3 15.4 14.3 17.6 14.4 18.6 18.5 18.3
Gross external financing needs/CAR&FXR 165.3 161.9 155.9 154.5 157.3 164.5 152.3 148.2 147.5 147.2
Narrow net external debt/CAR (63.6) (69.6) (77.1) (67.8) (76.4) (96.6) (90.9) (89.4) (90.4) (87.4)
GG balance/GDP 2.6 4.1 7.7 4.5 7.2 (9) (0.2) 1.0 2.0 2.0
GG net debt/GDP (75.9) (67.9) (59.9) (56.4) (61.2) (50.8) (58.5) (56.2) (55.4) (55.1)
CPI inflation (0.5) (0.5) 0.6 0.4 0.6 (0.2) 1.6 1.8 1.7 1.7
Bank credit to resident private sector/GDP 122.4 123.8 121.0 118.1 120.0 132.7 128.3 124.1 120.9 118.7
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Sri Lanka (CCC+/Stable/C)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 5
  • External assessment: 6
  • Fiscal assessment – Flexibility and performance: 6
  • Fiscal assessment – Debt burden: 6
  • Monetary assessment: 4
Outlook: Stable

The stable outlook reflects that, at this rating category, risks to Sri Lanka are relatively balanced over the next 12 months. The threat of external deterioration is partially offset by the country's access to official funding and accommodative macroeconomic policies, which are likely to boost domestic demand recovery.

Downside scenario

We could lower our ratings if foreign reserves decline by substantially more than we forecast, including if the government is unable to further boost reserves by issuing Sri Lanka Development Bonds (SLDBs). This would hurt its debt-servicing capacity.

Upside scenario

We would raise the rating if external buffers are significantly boosted, or if economic recovery is much stronger than expected for the next two years. This could lower the risks associated with the government's debt-servicing capacity.

Table 20

Sri Lanka
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 3.8 3.9 4.1 4.1 3.9 3.7 3.9 4.1 4.6 5.0
GDP growth 5.0 4.5 3.6 3.3 2.3 (3.6) 3.7 4.0 4.2 4.3
GDP per capita growth 4.1 3.3 2.4 2.2 1.6 (4.1) 3.0 3.3 3.5 3.6
Current account balance/GDP (2.3) (2.1) (2.6) (3.2) (2.2) (1.3) (1.9) (1.9) (1.9) (1.8)
Gross external financing needs/CAR&FXR 120.6 120.7 128.2 120.5 123.5 119.5 127.6 127.6 126.9 125.9
Narrow net external debt/CAR 136.6 141.6 143.1 139.5 150.2 175.0 166.8 162.0 154.7 149.9
GG balance/GDP (7.6) (5.3) (5.5) (5.3) (9.6) (11.1) (10.2) (9.3) (8.4) (8.4)
GG net debt/GDP 77.9 78.5 77.3 83.3 86.0 100.2 103.9 106.1 107.1 107.9
CPI inflation 3.8 4.0 7.7 2.1 3.5 6.2 5.5 5.0 5.0 5.0
Bank credit to resident private sector/GDP 35.8 39.5 41.2 44.2 44.4 48.6 50.2 51.7 53.2 54.7
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Taiwan (AA/Positive/A-1+)

Unsolicited rating

Rating score snapshot:
  • Institutional assessment: 3
  • Economic assessment: 2
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 2
  • Fiscal assessment – Debt burden: 2
  • Monetary assessment: 2
Outlook: Positive

The positive outlook reflects our expectation that Taiwan's economy will maintain robust growth over the medium term compared to other high-income economies, supported by strong external demand for Taiwan's electronics exports. This would close the income gap between Taiwan and the other economies where average incomes are currently higher.

Downside scenario

We may lower the ratings if Taiwan's economic growth slows sharply. We may also lower the ratings if cross-strait relations deteriorate abruptly, resulting in heightened geopolitical risks and adverse effects on the economy and fiscal position.

Upside scenario

We could raise the ratings if Taiwan sustains its current growth trajectory. We may also raise the ratings if cross-strait tension eases materially, reducing the risks to Taiwan's credit metrics.

Table 21

Taiwan
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 22.8 23.1 25.1 25.8 25.9 28.4 30.9 32.2 33.6 35.0
GDP growth 1.5 2.2 3.3 2.8 3.0 3.1 5.6 2.7 2.5 2.5
GDP per capita growth 1.2 2.0 3.2 2.7 2.9 3.3 4.1 2.7 2.4 2.6
Current account balance/GDP 13.6 13.1 14.1 11.6 10.6 14.1 10.5 10.0 10.1 10.1
Gross external financing needs/CAR&FXR 62.3 58.4 59.9 61.9 62.7 57.9 56.9 59.3 59.8 60.2
Narrow net external debt/CAR (110.8) (119.3) (112.2) (103.9) (118.3) (130.7) (113.1) (107.7) (103.3) (99.8)
GG balance/GDP 0.1 (0.3) (0.1) 0.0 0.1 (2.3) (2.3) (0.9) (0.8) (0.7)
GG net debt/GDP 37.4 36.3 34.7 33.5 31.9 32.8 33.7 33.4 33.0 32.5
CPI inflation (0.3) 1.4 0.6 1.4 0.6 (0.2) 1.4 1.1 1.0 0.9
Bank credit to resident private sector/GDP 145.8 146.8 151.8 156.7 160.8 166.0 167.1 169.2 171.2 173.2
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Thailand (BBB+/Stable/A-2)

Rating score snapshot:
  • Institutional assessment: 4
  • Economic assessment: 4
  • External assessment: 1
  • Fiscal assessment – Flexibility and performance: 3
  • Fiscal assessment – Debt burden: 3
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our view that the economy will recover gradually in the next 12-24 months even as sporadic anti-government protests continue. We envisage that Thailand's political uncertainty, which has become a key rating constraint over the last decade, will remain elevated over this period but will not deteriorate markedly to cause further social disruptions.

Downside scenario

We may lower the ratings if future economic growth is persistently weaker than what we currently forecast. This could increase the pressure on the current policymaking process and raise the likelihood of abrupt political and institutional changes.

Upside scenario

We may consider raising the ratings if the political situation stabilizes and if we assess that incentives for unexpected political changes are reduced. We may also raise the ratings if economic growth improves substantially.

Table 22

Thailand
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 5.8 6.0 6.6 7.3 7.8 7.2 7.7 8.1 8.6 9.2
GDP growth 3.1 3.4 4.2 4.2 2.3 (6.1) 2.8 4.9 4.6 2.9
GDP per capita growth 2.7 3.1 3.8 3.9 2.0 (6.3) 4.0 4.3 3.4 3.6
Current account balance/GDP 6.9 10.5 9.6 5.6 7.0 0.2 1.5 2.7 3.3 3.6
Gross external financing needs/CAR&FXR 70.9 68.7 66.9 68.8 66.5 66.2 65.1 74.0 76.0 77.5
Narrow net external debt/CAR (20.8) (24.9) (26.5) (25.2) (28.4) (48.5) (22.1) (14.5) (13.6) (13.9)
GG balance/GDP 1.0 1.3 0.8 1.1 0.2 (3.6) (3.5) (1.8) (1.8) (1.8)
GG net debt/GDP 20.9 21.2 22.2 22.5 23.6 36.2 41.0 40.5 40.4 40.1
CPI inflation (0.9) 0.2 0.7 1.1 0.7 (0.9) 1.0 1.0 1.1 1.0
Bank credit to resident private sector/GDP 124.9 122.6 121.0 120.8 120.0 134.8 137.2 137.6 137.4 136.9
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Vietnam (BB/Positive/B)

Rating score snapshot:
  • Institutional assessment: 4
  • Economic assessment: 4
  • External assessment: 3
  • Fiscal assessment – Flexibility and performance: 4
  • Fiscal assessment – Debt burden: 4
  • Monetary assessment: 4
Outlook: Positive

The positive outlook captures Vietnam's improving track record of effective administrative processes following the introduction of a directive in January 2020 that empowers the Ministry of Finance to make full and immediate payment of guaranteed government debt obligations directly to the creditor. The outlook also reflects our expectation that Vietnam's economy will continue to expand rapidly, exemplifying continued improvements in its policymaking settings and underpinning credit metrics.

Downside scenario

We may lower the rating if the economic downturn in Vietnam persists well beyond 2021. Potential risks include a longer-lasting, more severe global pandemic and the emergence of considerable stress in the country's banking system.

We may also downgrade Vietnam if its fiscal performance deteriorates markedly, leading to a higher annual change in net general government debt relative to GDP.

Upside scenario

We may raise our ratings over the next one to two years if the Vietnam government establishes a sustained track record of effective administrative capacity in line with its 2020 reforms to sufficiently reduce the risk of credit events on its obligations, such that future payment delays will very unlikely recur. This also assumes that Vietnam's economy will achieve a healthy recovery and the government's fiscal settings will remain anchored despite enduring pandemic risks.

Table 23

Vietnam
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 2.6 2.8 3.0 3.3 3.4 3.6 3.8 4.2 4.6 5.1
GDP growth 6.7 6.2 6.8 7.1 7.0 2.9 7.3 7.5 7.1 6.8
GDP per capita growth 5.5 5.1 5.7 6.0 5.0 1.5 7.4 6.1 5.8 5.5
Current account balance/GDP (0.9) 0.2 (0.6) 1.9 4.0 3.6 1.7 1.1 1.1 1.1
Gross external financing needs/CAR&FXR 94.3 98.1 97.3 93.1 90.4 86.4 85.8 85.3 84.4 83.6
Narrow net external debt/CAR 37.3 37.8 34.4 29.0 23.2 21.4 18.8 16.8 14.9 13.3
GG balance/GDP (5.0) (3.2) (2.0) (1.0) (3.3) (4.5) (4.5) (4.1) (3.9) (3.9)
GG net debt/GDP 39.8 41.3 37.1 33.7 30.7 33.4 34.5 35.3 35.9 36.5
CPI inflation 0.6 2.7 3.5 3.5 2.8 3.2 2.5 3.5 4.0 4.5
Bank credit to resident private sector/GDP 90.4 98.9 104.0 105.4 108.8 115.1 115.3 116.9 119.8 123.3
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri. e--Estimate. f--Forecast. CAR--Current account receipts. FXR--Foreign exchange reserves. GG--General government. CPI--Consumer price index.

Related Research

Primary Credit Analyst:KimEng Tan, Singapore + 65 6239 6350;
kimeng.tan@spglobal.com
Secondary Contacts:Andrew Wood, Singapore + 65 6239 6315;
andrew.wood@spglobal.com
Anthony Walker, Melbourne + 61 3 9631 2019;
anthony.walker@spglobal.com
Martin J Foo, Melbourne + 61 3 9631 2016;
martin.foo@spglobal.com
Rain Yin, Singapore + (65) 6239 6342;
rain.yin@spglobal.com
YeeFarn Phua, Singapore + 65 6239 6341;
yeefarn.phua@spglobal.com
Rebecca Hrvatin, Melbourne + 61 3 9631 2123;
rebecca.hrvatin@spglobal.com
Ruchika Malhotra, Singapore + 65 6239 6362;
ruchika.malhotra@spglobal.com
Raphael Mok, Singapore (65) 6597-6167;
raphael.mok@spglobal.com

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