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Asia-Pacific Sovereign Rating Trends 2022: New COVID Strain Thwarts An Earlier Recovery

This report does not constitute a rating action.

Rating Outlook And Trends

Asia-Pacific sovereign ratings are demonstrating resilience amid health crises, disrupted supply chains, geopolitical strains, and weak economies. S&P Global Ratings expects most of the ratings to remain unchanged over the next one to two years, even as COVID-19 continues to weigh on government and corporate balance sheets.

The ratings are mostly in the investment grade (see chart 1). The average Asia-Pacific sovereign rating, lying between 'BBB' and 'BBB+', had weakened further in the second half of 2021. Our downgrade on Fiji in September 2021 moved this average rating closer to 'BBB'.

Fifteen of the 21 sovereign ratings in Asia-Pacific have stable outlooks as of Dec. 31, 2021 (see chart 3). Four have negative outlooks (Indonesia, Sri Lanka, Papua New Guinea, and Malaysia). The ratings on Taiwan and Vietnam have a positive outlook, partly because of their better-performing economies.

Chart 1

image

In the second half of 2021, we took two negative sovereign rating actions in the region. First, we downgraded Fiji to 'B+' because we believe the country's protracted economic recovery has elevated budgetary strains. The freeze in international travel since the onset of COVID-19 has hit Fiji's economy hard.

In late August 2021, we revised the outlook on the Sri Lanka long-term rating to negative from stable. The outlook revision was in keeping with our view that the government faced increasingly challenging external financing prospects. Persistent high fiscal deficits would continue to add to funding pressure. In our view, funding from existing sources is unlikely to be enough to cover financing needs. High costs also limit commercial funding options.

Chart 2

image

We view the Sri Lanka government's access to external financing to be increasingly dependent on favorable business, economic, and financial conditions. As the sovereign credit metrics worsened further, we revised the Sri Lanka long-term rating to 'CCC' from 'CCC+' in January 2022. The outlook is negative.

Chart 3

image

Credit Challenges Amid Recovery

The omicron variant that emerged in late 2021 dashed hopes of a rebound in international travel. Until the virus began spreading fast in December 2021, international travel had shown signs of coming back in parts of Asia-Pacific. Foreign arrivals in Sri Lanka and Thailand--where tourism is a key industry--picked up sharply in the final two months of the year (see chart 4). The recovery in arrivals reflected increased confidence in these countries in managing the pandemic as vaccination rates rose.

However, the surge in new infections in many countries has put a recovery of visitor arrivals into doubt. If arrival numbers stall for a long time, tourism-dependent economies will find sovereign credit pressures hard to shake.

Chart 4

image

The omicron variant has also focused attention on COVID management strategies, especially in China. Many Asia-Pacific regions have achieved high vaccination rates (see chart 5), so most patients will not fall seriously sick. Even so, the fast-spreading virus could still overwhelm hospitals simply because it infects so many. Should COVID cases overwhelm healthcare systems, this could force some governments to impose strict social distancing restrictions.

Chart 5

image

The economies most at risk of being affected by new COVID restrictions could be those where hospital capacities are smallest relative to their populations. In much of Asia-Pacific, hospital beds (adjusted for population size) are fewer than in many European countries (see chart 6). Consequently, healthcare resources could be stretched at lower levels of infections. This may necessitate stronger social distancing restrictions from governments.

Chart 6

image

Questions over China's zero-COVID policy increase.  Increasing attention is being focused on China where the government continues its strict zero-COVID policy. The policy has been beneficial for Chinese economic growth and allowed many citizens to live near-normal lives. The much more contagious omicron variant, however, has seen infections break out in several places in the country simultaneously.

Concerns are increasing that the policy may see economic costs outweigh benefits, particularly as new and more contagious COVID variants arrive. Apart from the hit on Chinese growth, widespread strict social distancing rules may also create serious supply-chain disruptions that affect countries across the world. Many analysts question whether China can maintain its strong economic growth as it continues to battle the pandemic in this way. A pronounced slowdown of the Chinese economy could have a significant effect on its trade partners in Asia-Pacific.

More observers also question how China will emerge from its zero-COVID policy. Most countries have gone down the road of living with the disease, even if the omicron surge has forced some into temporary retreat. With its population largely never infected by COVID, China could experience a large, prolonged surge in the number of infections if it opened its borders and eased domestic restrictions. Pressures on the Chinese health care system will mount.

This suggests the country will stick with the policy for a while. China is more likely to ease its strict COVID policy if a highly effective vaccine were found, a very effective cure were developed, or if it significantly expanded its healthcare capacity.

Geopolitical risks may become more prominent in 2022.  U.S.-China relations pose another threat to regional sovereign credit metrics. This is an important political year for the U.S. (where the mid-term elections will be held near the end of 2022) and for China (which holds its 20th Party Congress late in 2022). Any disagreement between the two countries risks serious escalation since both governments will have less room for compromise. The risk could be exacerbated if the U.S. remains distracted by developments in Eastern Europe and the Middle East well into the new year.

Chart 7

image

At the same time, tensions on the Korean peninsula have returned. The Democratic People's Republic of Korea (North Korean) regime was focused on keeping COVID-19 out of the country in the past two years. Now, it appears to be ratcheting up old conflicts.

In late 2021 and early 2022, the country conducted several high-profile missile tests (see chart 7). Possibly, with both China and the U.S. preoccupied with key political events in 2022, the North Korean regime sees a chance that it could get some of the economic sanctions on the country removed. More provocative and destabilizing actions may come in the new year.

Inflation risks rise. challenge for the lowest rated sovereigns  The higher inflation seen in some advanced economies don't appear to have swayed price trends in Asia-Pacific yet (see chart 8). Outside Sri Lanka and Pakistan, where the central banks had raised policy interest rates, consumer price inflation was not abnormally high late in 2021. Modest inflation has even allowed China to bring down interest rates marginally, as a policy-induced slowdown in the country's real estate sector weighed on economic growth.

Chart 8

image

Nevertheless, some Asia-Pacific central banks have tightened policies to hold down inflation expectations. This includes the Reserve Bank of New Zealand and the Monetary Authority of Singapore, as well as the previously discussed actions of the central banks of Sri Lanka and Pakistan. The Bank of Korea also lifted its policy rate, although its actions also reflected concerns over rapid household credit growth and rising real estate prices. Less-intense inflationary pressures in much of Asia-Pacific suggest forced increases in policy interest won't derail regional economic recovery by themselves.

For Pakistan and Sri Lanka, however, higher inflation intensified already-significant credit strains, crimping policy flexibility. Despite challenges in obtaining new financing, the Sri Lankan government introduced a US$1.2 billion relief package targeted at public sector employees and low-income households. This helped to offset the rising cost of living but added to the size of the already-large fiscal deficit.

Pakistan recently passed a budget that ended some sales-tax exemptions to obtain more financial support from the International Monetary Fund. However, this move has ignited significant political pressures as it adds to consumer prices.

Elsewhere in Asia-Pacific, where concerns about domestic inflation are not as serious, the potential for greater increases in international interest rates may affect some sovereigns. Borrowers in economies that rely on external financing could see financing costs rise further. In places such as Indonesia, rate moves that surprise on the upside may hold back economic growth. Stronger export performance and a comparatively favorable policy environment should shield Indonesia from significant financial disruptions arising from capital outflows.

Table 1

Asia-Pacific Sovereign Rating Score Snapshot
Sovereign/issuer 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

B+/Stable/B 5 5* 3 4 6* 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 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/Negative/C 5 5 6 6 6 4

Taiwan

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

Thailand

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

Vietnam

BB/Positive/B 4 4 3 4 4 4
% of sovereigns with a score of '1' 14.3 28.6 42.9 14.3 9.5 14.3
% of sovereigns with a score of '2' 4.8 4.8 9.5 9.5 23.8 28.6
% of sovereigns with a score of '3' 33.3 4.8 9.5 19.0 4.8 19.0
% of sovereigns with a score of '4' 14.3 42.9 4.8 23.8 19.0 23.8
% of sovereigns with a score of '5' 28.6 14.3 19.0 4.8 14.3 9.5
% of sovereigns with a score of '6' 4.8 4.8 14.3 28.6 28.6 4.8
Median 3.0 4.0 2.0 4.0 4.0 3.0
Mean 3.5 3.2 2.9 3.8 3.9 3.0
Standard deviation 1.5 1.6 2.0 1.8 1.8 1.4
*Deterioration since June 2021. §Improvement since June 2021. Source: S&P Global Ratings.

The recent rapid spread of the omicron variant highlights the inherent uncertainties of the pandemic as well as the importance and benefits of vaccines. The risk of new, more severe variants displacing omicron and evading existing immunity cannot be ruled out. But our current base case assumes that existing vaccines can continue to provide significant protection against severe illness. Furthermore, many governments, businesses, and households around the world are tailoring policies to limit the adverse economic impact of recurring COVID-19 waves. Consequently, we don't expect a repeat of the sharp global economic contraction of second-quarter 2020. Meanwhile, we continue to assess how well each issuer adapts to new waves in its geography or industry.

Table 2

Asia-Pacific Economic Outlook
Real GDP growth (%) GG balance/GDP (%) Net GG debt/GDP (%) Current account balance/GDP (%) Narrow net external debt/CAR (%)
2021 2022 2021 2022 2021 2022 2021 2022 2021 2022
Australia 1.43 2.12 (8.75) (6.61) 29.55 32.86 3.38 2.62 274.71 224.06
Bangladesh 5.47 7.00 (6.00) (6.20) 32.33 34.83 (1.08) (1.81) 42.74 34.57
China 7.99 4.91 (3.20) (3.00) 58.42 59.08 2.30 2.12 (50.15) (41.26)
Cook Islands (22.89) 6.86 (28.50) (14.20) 33.09 44.49 71.34 55.49 (37.26) (34.27)
Fiji (4.07) 6.17 (12.00) (12.00) 75.75 81.79 (17.10) (10.06) 54.29 50.80
Hong Kong 6.51 2.47 (4.45) (1.80) (27.72) (25.31) 8.98 7.67 (57.93) (57.55)
India 9.48 7.82 (11.40) (9.50) 89.87 89.78 (0.96) (1.38) (19.46) (19.31)
Indonesia 3.28 5.60 (5.50) (4.20) 38.49 39.56 0.09 (1.08) 100.95 100.11
Japan 2.71 2.20 (8.30) (5.50) 167.99 169.96 2.04 2.08 (91.97) (84.35)
Korea (the Republic of) 3.88 2.70 (4.10) (1.80) 12.85 14.02 4.80 4.39 (43.60) (47.02)
Malaysia 2.62 6.31 (5.50) (4.30) 71.92 71.29 5.11 4.65 27.39 23.92
Mongolia 5.50 7.00 (4.80) (3.50) 74.32 69.40 (8.03) (8.11) 154.88 140.85
New Zealand 5.15 1.19 (7.10) (4.96) 30.87 34.55 (3.30) (6.34) 201.04 202.89
Pakistan 3.94 4.10 (7.13) (6.10) 75.88 77.92 (0.64) (2.68) 141.61 140.16
Papua New Guinea 1.22 4.01 (7.84) (6.80) 50.87 54.79 16.20 13.50 122.69 130.09
Philippines 4.99 7.43 (7.70) (5.50) 42.23 43.55 0.79 0.55 (36.05) (38.05)
Singapore 6.55 4.15 (0.20) 1.00 (52.78) (50.62) 17.32 23.87 (89.75) (84.52)
Sri Lanka 4.50 4.00 (11.10) (9.30) 104.07 106.29 (1.66) (1.72) 162.61 161.35
Taiwan 5.84 2.84 (2.25) (0.90) 31.49 31.40 11.93 11.19 (95.86) (92.93)
Thailand 1.23 3.63 (3.80) (3.50) 39.11 43.78 (1.70) (0.24) (28.90) (20.67)
Vietnam 1.90 7.50 (4.50) (4.30) 36.25 36.67 1.55 1.82 14.54 12.27
f--Forecast. GG--General government. CAR-- Current account receipts. Source: S&P Global Ratings.

Sovereign Summaries

Australia (AAA/Stable/A-1+)

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. In our view, 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 other sovereign credit factors, including fiscal factors, need to be strong to keep the sovereign rating at the highest level on our scale. A stronger fiscal position would also provide a buffer for an abrupt weakening of the housing market and the vulnerabilities such an event could bring to financial stability.

Table3

Australia
2015 2016 2017 2018 2019 2020 2021e 2022f 2023f 2024f
GDP per capita (US$ '000) 56.7 50.0 54.0 57.4 55.0 51.8 60.0 62.9 65.7 67.7
GDP growth 2.2 2.8 2.3 3.0 2.2 (0.2) 1.4 2.1 4.3 2.4
GDP per capita growth 0.7 1.2 0.6 1.4 0.6 (1.5) 1.3 1.6 2.8 0.9
Current account balance/GDP (3.7) (4.6) (2.3) (2.8) (0.8) 1.9 3.4 2.6 1.1 0.9
Gross external financing needs/CAR plus FXR 254.2 274.3 250.8 232.4 221.0 216.4 215.8 202.6 206.5 202.3
Narrow net external debt/CAR 265.2 320.3 273.6 260.1 247.1 261.3 274.7 224.1 223.4 211.8
GG balance/GDP (2.2) (2.4) (2.1) (1.0) (0.7) (6.8) (8.8) (6.6) (3.5) (3.2)
GG net debt/GDP 12.6 14.4 15.1 16.4 14.3 21.5 29.6 32.9 34.8 35.7
CPI inflation 1.7 1.4 1.7 1.9 1.7 1.3 1.6 2.9 2.6 2.2
Bank credit to resident private sector/GDP 150.7 158.1 157.0 155.9 153.0 175.5 169.6 165.5 161.2 159.8
Note: 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. Source: S&P Global Ratings.

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 prospects will prevail against the risks associated with the COVID-19 pandemic over 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 elevated fiscal deficits. We may also raise the ratings if Bangladesh's institutional settings have markedly improved.

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, and gross external financing needs exceed 100% of current account receipts plus usable reserves, on a sustained basis.

Table4

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 2.1 2.4 2.6 2.9
GDP growth 6.6 7.1 7.3 7.9 8.2 3.5 5.5 7.0 7.1 7.1
GDP per capita growth 5.4 6.0 6.1 6.7 7.1 2.5 4.3 5.8 5.9 5.9
Current account balance/GDP 1.5 1.9 (0.5) (3.6) (1.5) (1.5) (1.1) (1.8) (1.8) (1.8)
Gross external financing needs/CAR plus FXR 74.1 69.6 73.2 83.8 83.2 84.0 76.4 80.9 77.0 78.2
Narrow net external debt/CAR 12.2 10.7 16.0 32.6 41.4 34.9 42.7 34.6 38.2 41.9
GG balance/GDP (3.4) (3.7) (4.5) (5.6) (5.4) (5.6) (6) (6.2) (5.2) (5)
GG net debt/GDP 22.9 23.1 23.2 23.8 25.3 28.8 32.3 34.8 36.1 37.2
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 47.1 48.4 48.2 48.2 48.4
Note: 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. Source: S&P Global Ratings.

China (A+/Stable/A-1)

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 it maintains measures to restrict unsustainable growth in credit and off-budget borrowings. 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 12.3 13.5 14.7 15.8
GDP growth 6.9 6.7 7.0 6.8 6.0 2.4 8.0 4.9 4.9 4.8
GDP per capita growth 6.4 6.0 6.4 6.4 5.6 2.2 7.6 4.6 4.7 4.6
Current account balance/GDP 2.7 1.7 1.5 0.2 0.7 1.9 2.3 2.1 1.6 1.5
Gross external financing needs/CAR plus FXR 56.0 53.7 59.7 67.0 68.5 64.8 68.2 71.6 74.7 77.3
Narrow net external debt/CAR (102.0) (98.2) (84.1) (70.3) (70.7) (67.2) (50.2) (41.3) (33.7) (26.1)
GG balance/GDP (2.3) (2.8) (2.4) (2.8) (4.3) (9.5) (3.2) (3) (2.8) (2.8)
GG net debt/GDP 42.4 47.4 46.7 46.9 48.9 56.9 58.4 59.1 58.2 57.7
CPI inflation 1.4 2.0 1.6 2.1 2.9 2.5 1.0 2.1 2.2 2.2
Bank credit to resident private sector/GDP 168.0 182.3 180.1 186.0 190.4 206.2 205.8 209.7 213.4 219.3
Note: 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. Source: S&P Global Ratings.

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 rating 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 rating over the next 12 months if the Cook Islands sustainably improves 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 24.9 21.2 23.5 27.2 29.9
GDP growth 4.8 5.5 6.8 8.9 5.3 (5.2) (22.9) 6.9 11.8 5.0
GDP per capita growth 9.6 9.8 5.9 8.1 4.5 (6.0) (23.5) 6.0 11.0 4.2
Current account balance/GDP 22.7 36.3 16.7 35.3 34.2 49.2 71.3 55.5 47.3 43.2
Gross external financing needs/CAR plus 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) (43.2) (37.3) (34.3) (31.7) (29.4)
GG balance/GDP (4.6) (1.7) 6.8 4.1 5.0 (6.3) (28.5) (14.2) (5.8) (2.4)
GG net debt/GDP 12.7 7.5 (0.3) (7.5) (2.7) 4.0 33.1 44.5 43.3 37.5
CPI inflation 5.3 (0.1) (0.1) 0.4 0.0 0.7 1.2 1.0 1.0 1.0
Bank credit to resident private sector/GDP 61.7 52.3 50.2 45.9 41.8 46.7 61.9 59.0 53.5 50.8
Note: 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. Source: S&P Global Ratings.

Fiji (B+/Stable/B)

Rating score snapshot:
  • Institutional assessment: 5
  • Economic assessment: 5
  • External assessment: 3
  • Fiscal assessment – Flexibility and performance: 4
  • Fiscal assessment – Debt burden: 6
  • Monetary assessment: 5
Outlook: Stable

The stable outlook reflects our expectation of an economic recovery in 2022, following a deep contraction over the preceding two years. As vaccination rates rise and international travel resumes, we expect the combination of renewed GDP growth and higher tourism earnings to lead to narrower fiscal and current account deficits and a stabilizing public debt burden.

Downside scenario

We could lower our ratings on Fiji if the pandemic and related travel restrictions are significantly prolonged, inducing further strain on tourism and related industries. Such a scenario would most likely result in lower real GDP growth, consistently larger fiscal deficits, and/or weaker external metrics than currently projected. We could also lower our ratings in the event of a large exogenous shock, such as a severe natural disaster.

Upside scenario

We could raise our ratings on Fiji if economic growth and tourism receipts recover faster than we currently project. This could result in stronger fiscal and external metrics. We could also raise our ratings if Fiji's institutional and policy settings continue to improve, providing greater support for sustainable finances and balanced growth in the medium-term or if Fiji's extensive foreign exchange restrictions are unwound without detriment to its official reserves.

Table7

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 5.0 5.2 5.6 6.2 6.8
GDP growth 4.5 2.4 5.4 3.8 (0.5) (15.7) (4.1) 6.2 8.0 8.0
GDP per capita growth 4.1 2.0 3.7 3.2 (1.0) (16.2) (4.6) 5.5 7.3 7.4
Current account balance/GDP (3.5) (3.6) (6.6) (8.3) (12.5) (12.5) (17.1) (10.1) (5.6) (5.0)
Gross external financing needs/CAR plus FXR 98.2 98.5 100.0 100.9 110.9 107.4 112.8 103.3 99.6 98.0
Narrow net external debt/CAR (5.1) (9.9) (10.5) 3.5 9.7 25.6 54.3 50.8 40.2 34.0
GG balance/GDP (3.8) (1.3) (1.9) (4.3) (3.5) (6.5) (12) (12) (4.5) (3.5)
GG net debt/GDP 40.7 38.8 36.1 40.1 43.7 62.4 75.8 81.8 77.3 72.7
CPI inflation 1.4 3.9 3.4 4.1 1.8 (2.6) 1.5 2.5 3.5 3.5
Bank credit to resident private sector/GDP 66.0 69.3 70.3 71.1 72.7 86.6 90.7 88.4 84.8 81.8
Note: 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. Source: S&P Global Ratings.

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 Hong Kong's economic recovery over the next 12-24 months will be sustained, while recent legislative changes, including electoral reform, will not fundamentally affect the Special Administrative Region government's autonomy in setting economic policies, as laid out in the Basic Law.

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, strengthening public finances and raising long-term economic prospects.

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 50.1 51.8 53.4 55.0
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) 7.8 1.8 1.3 1.2
Current account balance/GDP 3.3 4.0 4.6 3.7 5.9 6.5 9.0 7.7 6.5 5.3
Gross external financing needs/CAR plus FXR 184.8 182.9 175.2 177.8 188.3 187.6 178.6 183.2 185.9 186.8
Narrow net external debt/CAR (59.7) (69.9) (65.5) (59.1) (62.8) (72.7) (57.9) (57.6) (50.8) (43.9)
GG balance/GDP 0.6 4.5 5.6 2.4 (0.6) (9.4) (4.5) (1.8) (1.5) (1.5)
GG net debt/GDP (35.7) (38.9) (42.1) (42.0) (41.3) (34.5) (27.7) (25.3) (23.2) (21.2)
CPI inflation 3.0 2.4 1.5 2.4 2.9 0.3 1.3 1.8 1.9 1.8
Bank credit to resident private sector/GDP 210.4 219.0 237.6 232.7 248.8 267.8 264.8 266.6 269.5 273.2
Note: 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. Source: S&P Global Ratings.

India (BBB-/Stable/A-3)

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 pandemic, and that the country's strong external settings will buffer 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 2022 (ending March 31, 2022) 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. We may also raise the ratings on a sustained and substantial improvement in the central bank's monetary policy effectiveness and credibility, such that inflation is managed at a durably lower rate over time.

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 6.0 6.5
GDP per capita growth 6.8 7.1 5.7 5.4 3.0 (8.2) 8.5 6.8 5.1 5.6
Current account balance/GDP (1.1) (0.6) (1.8) (2.1) (0.9) 0.9 (1.0) (1.4) (1.7) (1.9)
Gross external financing needs/CAR plus FXR 88.9 87.5 90.2 89.4 88.2 78.1 77.8 77.8 79.2 81.0
Narrow net external debt/CAR 15.0 9.6 8.5 10.3 2.0 (17.6) (19.5) (19.3) (17.6) (14.7)
GG balance/GDP (7.4) (7.4) (6.7) (6.6) (7.6) (14.2) (11.4) (9.5) (9) (8.7)
GG net debt/GDP 68.5 68.7 70.2 71.8 75.0 91.1 89.9 89.8 90.1 90.1
CPI inflation 4.9 4.5 3.6 3.4 4.8 6.2 5.5 5.0 4.5 4.5
Bank credit to resident private sector/GDP 53.9 52.0 51.5 52.8 52.2 56.7 55.2 55.7 56.4 56.5
Note: 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. Source: S&P Global Ratings.

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 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% 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 4.5 4.8 5.1
GDP growth 4.9 5.0 5.1 5.2 5.0 (2.1) 3.3 5.6 4.8 4.8
GDP per capita growth 3.6 3.8 3.8 4.0 3.9 (3.1) 2.2 4.6 3.8 3.8
Current account balance/GDP (2.0) (1.8) (1.6) (2.9) (2.7) (0.4) 0.1 (1.1) (1.7) (1.8)
Gross external financing needs/CAR plus FXR 93.8 94.2 92.1 95.9 98.2 88.6 87.7 90.9 93.4 94.3
Narrow net external debt/CAR 101.0 102.2 96.0 100.9 115.6 132.7 101.0 100.1 100.6 100.4
GG balance/GDP (2.6) (2.5) (2.5) (1.7) (2.2) (6.1) (5.5) (4.2) (3) (2.7)
GG net debt/GDP 25.1 26.1 26.2 27.2 27.6 35.7 38.5 39.6 39.6 39.4
CPI inflation 3.4 3.0 3.6 3.1 2.8 2.0 1.5 2.7 2.9 2.8
Bank credit to resident private sector/GDP 37.3 37.9 37.4 38.5 38.1 38.4 37.1 37.3 38.0 38.7
Note: 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. Source: S&P Global Ratings.

Japan (A+/Stable/A-1)

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 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 pressure to increase spending on social services and national defense will grow. We estimate that these factors will keep annual general government deficits at levels at or above 5% of GDP for much of the next three years.

Upside scenario

We may raise the ratings on Japan if we believe fiscal repair would 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.

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.

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 40.6 40.0 39.4 38.7 39.3 39.8
GDP growth 1.7 0.8 1.8 0.2 (0.5) (4.4) 2.7 2.2 1.1 1.0
GDP per capita growth 1.7 0.9 2.0 0.4 (0.3) (4.1) 3.1 2.6 1.5 1.4
Current account balance/GDP 3.1 3.9 4.1 3.5 3.4 3.0 2.0 2.1 2.2 2.5
Gross external financing needs/CAR plus FXR 156.8 157.7 171.9 168.3 180.4 188.6 201.5 203.5 204.5 204.5
Narrow net external debt/CAR (135.9) (123.3) (109.0) (81.8) (82.9) (101.8) (92.0) (84.4) (76.1) (68.1)
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 143.5 145.1 144.6 147.0 150.1 161.4 168.0 170.0 172.0 173.4
CPI inflation 0.7 (0.1) 0.5 0.9 0.5 0.0 (0.2) 1.0 0.6 0.7
Bank credit to resident private sector/GDP 138.9 141.7 145.1 146.9 152.6 166.6 168.1 167.9 168.1 168.4
Note: 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. Source: S&P Global Ratings.

Korea, the Republic of (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 31.6 34.6 34.8 35.9 37.0
GDP growth 2.8 3.0 3.2 2.9 2.2 (0.9) 3.9 2.7 2.5 2.4
GDP per capita growth 2.3 2.5 2.9 2.4 2.0 (1.0) 3.8 2.7 2.5 2.4
Current account balance/GDP 7.2 6.5 4.6 4.5 3.6 4.6 4.8 4.4 4.2 4.1
Gross external financing needs/CAR plus FXR 69.4 68.2 72.4 73.4 75.0 73.0 76.2 74.1 73.2 72.7
Narrow net external debt/CAR (34.3) (47.0) (49.5) (45.7) (50.5) (52.2) (43.6) (47.0) (47.6) (48.3)
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 14.0 12.8 10.2
CPI inflation 0.7 1.0 1.9 1.5 0.4 0.5 2.4 2.0 1.3 1.3
Bank credit to resident private sector/GDP 147.8 147.6 147.5 151.7 159.0 173.6 172.1 170.6 170.5 170.4
Note: 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. Source: S&P Global Ratings.

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 12.0 12.9 13.7
GDP growth 5.1 4.5 5.8 4.8 4.4 (5.7) 2.6 6.3 5.2 4.5
GDP per capita growth 3.5 3.0 4.5 3.7 4.0 (5.8) 2.4 5.0 4.0 3.3
Current account balance/GDP 3.0 2.4 2.8 2.2 3.5 4.2 5.1 4.7 3.4 5.6
Gross external financing needs/CAR plus FXR 86.3 94.2 95.0 94.8 95.5 93.8 92.0 92.8 93.7 91.1
Narrow net external debt/CAR 21.1 28.9 25.5 25.0 28.7 32.9 27.4 23.9 21.2 17.5
GG balance/GDP (2.9) (2.6) (2.4) (2.7) (2.0) (4.7) (5.5) (4.3) (3.2) (3)
GG net debt/GDP 48.6 47.3 55.1 56.2 58.9 69.2 71.9 71.3 69.8 69.2
CPI inflation 2.1 2.1 3.9 0.9 0.7 (1.1) 2.3 2.0 2.0 2.0
Bank credit to resident private sector/GDP 132.8 132.4 127.2 131.1 131.5 145.7 145.9 143.5 141.4 141.4
Note: 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. Source: S&P Global Ratings.

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 balances enduring pandemic-related risks to Mongolia's commodity export and growth prospects over the near term against our expectation that the country's nascent economic recovery will become more entrenched over the next 12 months, leading to improvements in Mongolia's external, fiscal, and debt metrics.

Downside scenario

Downward pressure could emerge if the economic recovery is derailed or more protracted than we expect, leading to a material degradation of Mongolia's real GDP trend growth rate, and deterioration of its fiscal or debt metrics.

Upside scenario

We could raise the rating if the economy outperforms our current projections such that fiscal, debt, or external metrics improve more rapidly than we expect. We could also raise the rating if we observe that Mongolia's institutional settings materially improve, especially in the predictability of policymaking.

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 4.4 4.9 5.3 5.8
GDP growth 2.5 1.5 5.6 7.6 5.5 (4.4) 5.5 7.0 6.8 6.5
GDP per capita growth 0.5 (0.5) 3.6 5.6 3.6 (6.1) 3.7 5.2 5.1 4.8
Current account balance/GDP (8.2) (6.3) (10.1) (16.8) (15.2) (5.0) (8.0) (8.1) (7.9) (7.1)
Gross external financing needs/CAR plus FXR 140.7 146.2 149.4 130.6 123.6 104.9 109.5 115.5 113.2 110.2
Narrow net external debt/CAR 178.2 252.1 223.3 181.0 166.0 181.1 154.9 140.9 126.4 112.9
GG balance/GDP (8.6) (15.3) (3.8) 2.6 1.0 (9.4) (4.8) (3.5) (2.5) (2.5)
GG net debt/GDP 66.7 94.1 85.1 74.3 63.8 78.0 74.3 69.4 65.4 61.0
CPI inflation 5.7 0.7 4.3 6.8 7.3 3.7 9.5 7.0 6.0 6.0
Bank credit to resident private sector/GDP 56.2 56.4 54.8 56.9 50.4 47.9 46.9 44.8 43.9 43.1
Note: 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. Source: S&P Global Ratings.

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 for the country to address potential risks associated with high levels of external debt, high private-sector debt, and rising property prices that could undermine 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 39.9 46.2 49.0 52.7 55.5
GDP growth 4.1 3.8 3.5 3.7 2.9 (1.4) 5.2 1.2 3.8 2.5
GDP per capita growth 2.1 1.6 1.3 1.7 1.2 (3.4) 4.0 0.8 2.9 1.5
Current account balance/GDP (3.4) (2.1) (2.5) (3.4) (3.5) (1.5) (3.3) (6.3) (5.0) (4.6)
Gross external financing needs/CAR plus FXR 206.9 199.7 201.0 194.7 188.6 196.4 201.7 226.5 234.6 233.3
Narrow net external debt/CAR 164.0 187.8 180.2 158.7 160.8 168.3 201.0 202.9 194.6 190.3
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 19.9 18.5 17.9 18.2 25.5 30.9 34.6 35.9 36.2
CPI inflation 0.6 0.3 1.4 1.5 1.7 1.8 1.9 4.6 2.3 2.3
Bank credit to resident private sector/GDP 157.6 160.5 160.6 157.4 158.3 165.8 161.6 163.6 162.3 163.4
Note: 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. Source: S&P Global Ratings.

Pakistan (B-/Stable/B)

Rating score snapshot:
  • Institutional assessment: 6
  • Economic assessment: 5
  • 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 continued recovery will help stabilize fiscal and debt metrics, donor and partner financing will ensure that Pakistan can meet its external obligations over the next 12 months, and the country will continue to roll over its commercial credit lines.

Downside scenario

We may lower our ratings if Pakistan's fiscal or external indicators deteriorate well beyond their current levels. Downward pressure on the ratings would emerge if financial support from bilateral and multilateral partners quickly erodes, or usable foreign exchange reserves fall substantially to levels indicating distress in servicing Pakistan's external debt obligations.

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 1.4 1.5 1.5 1.5
GDP growth 4.1 4.6 5.2 5.5 2.1 (0.5) 3.9 4.1 4.3 4.3
GDP per capita growth 1.9 2.4 3.6 3.4 0.1 (1.9) 2.0 2.1 2.3 2.3
Current account balance/GDP (1.0) (1.8) (4.0) (6.1) (4.8) (1.7) (0.6) (2.7) (2.8) (3.1)
Gross external financing needs/CAR plus FXR 107.9 105.7 112.4 131.3 145.4 137.8 115.4 118.7 114.0 115.6
Narrow net external debt/CAR 80.3 90.2 108.5 135.8 158.8 163.6 141.6 140.2 143.0 144.5
GG balance/GDP (5.3) (4.6) (5.8) (6.5) (9.1) (8.1) (7.1) (6.1) (5.3) (4.8)
GG net debt/GDP 58.3 60.8 61.1 65.9 79.5 81.0 75.9 77.9 77.3 75.8
CPI inflation 4.5 2.9 4.2 3.9 7.3 11.7 8.9 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 19.4 19.4 19.5 19.6
Note: 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. Source: S&P Global Ratings.

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 rather than repay debt incurred through Eda Kopa (Solwara).

We could revise the outlook to stable if the effect of the 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 2.6 2.6 2.7 2.7 2.8
GDP growth 6.6 5.5 3.5 (0.3) 5.9 (3.9) 1.2 4.0 3.4 2.8
GDP per capita growth 4.5 3.4 1.5 (2.2) 3.8 (5.7) (0.9) 1.9 1.2 0.7
Current account balance/GDP 20.3 24.9 23.5 22.6 22.2 17.3 16.2 13.5 11.1 8.4
Gross external financing needs/CAR plus FXR 79.8 72.5 97.1 81.3 81.0 85.1 78.4 88.3 90.0 98.8
Narrow net external debt/CAR 207.6 177.9 133.7 122.7 103.4 116.8 122.7 130.1 152.0 172.6
GG balance/GDP (4.6) (4.7) (2.5) (2.6) (5.0) (9.0) (7.8) (6.8) (5.2) (4.0)
GG net debt/GDP 24.5 29.5 29.5 27.6 36.3 44.2 50.9 54.8 57.0 58.2
CPI inflation 6.0 6.7 5.4 4.4 3.9 4.9 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 19.0 19.3 18.7 18.2 17.8
Note: 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. Source: S&P Global Ratings.

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 Philippine 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 on further improvement in the institutional settings, which have contributed to a significant enhancement in the Philippines' pre-pandemic credit metrics over the past decade.

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 4.2 4.6
GDP growth 6.4 7.2 6.9 6.3 6.1 (9.6) 5.0 7.4 7.3 7.2
GDP per capita growth 4.8 5.4 5.3 4.8 4.6 (10.8) 3.6 6.0 6.0 5.8
Current account balance/GDP 2.4 (0.4) (0.7) (2.6) (0.8) 3.1 0.8 0.6 (0.1) (0.2)
Gross external financing needs/CAR plus FXR 64.0 68.0 70.5 74.1 74.0 62.0 60.8 60.1 61.0 61.7
Narrow net external debt/CAR (20.8) (25.4) (25.1) (18.6) (24.9) (36.2) (36.1) (38.1) (38.3) (36.1)
GG balance/GDP 0.9 (0.6) (0.5) (1.5) (1.9) (7.1) (7.7) (5.5) (3.6) (3.1)
GG net debt/GDP 26.8 27.5 27.9 28.0 28.9 37.8 42.2 43.6 42.4 40.9
CPI inflation 0.7 1.3 2.9 5.2 2.5 2.6 4.5 2.4 2.4 2.5
Bank credit to resident private sector/GDP 46.8 49.7 52.9 55.0 55.6 59.9 63.0 65.3 66.9 68.6
Note: 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. Source: S&P Global Ratings.

Singapore (AAA/Stable/A-1+)

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 68.8 72.3 74.7 76.9
GDP growth 3.0 3.3 4.5 3.5 1.4 (5.4) 6.6 4.2 3.3 2.8
GDP per capita growth 1.8 2.0 4.4 3.0 0.2 (5.1) 9.6 2.7 0.8 0.9
Current account balance/GDP 18.7 17.6 17.3 15.4 14.3 17.6 17.3 23.9 24.2 24.1
Gross external financing needs/CAR plus FXR 165.3 161.9 155.9 154.5 157.3 164.5 150.8 144.5 142.9 142.6
Narrow net external debt/CAR (63.8) (69.7) (77.3) (67.9) (76.6) (96.7) (89.8) (84.5) (83.5) (80.5)
GG balance/GDP 2.6 4.1 7.7 4.5 7.2 (14.7) (0.2) 1.0 2.0 2.0
GG net debt/GDP (75.9) (67.9) (59.9) (56.4) (61.2) (45.7) (52.8) (50.6) (49.9) (49.9)
CPI inflation (0.5) (0.5) 0.6 0.4 0.6 (0.2) 2.1 2.0 1.7 1.7
Bank credit to resident private sector/GDP 122.4 123.8 121.0 118.1 120.0 132.7 125.6 121.0 117.2 115.4
Note: 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. Source: S&P Global Ratings.

Sri Lanka (CCC/Negative/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: Negative

The negative outlook reflects our expectation that Sri Lanka's external financial position will deteriorate further over the coming quarters. This would affect the country's ability to service its debt over the next 12 months.

Downside scenario

We could lower our ratings if Sri Lanka's fundraising activities fall short of government targets or its foreign exchange reserves erode further beyond our expectations, leading to higher risk on the sovereign's ability to service debt. We could also lower the ratings if the government signals its intention to restructure its outstanding commercial debt, implying that investors would receive less value than that promised on the original securities.

Upside scenario

We may revise the outlook to stable, or raise the rating, if Sri Lanka can significantly boost external buffers or its economic recovery is much stronger than we expect. 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 3.8 3.9 4.2 4.6
GDP growth 5.0 4.5 3.6 3.3 2.3 (3.6) 4.5 4.0 4.2 4.3
GDP per capita growth 4.1 3.3 2.4 2.2 1.6 (4.1) 3.8 3.3 3.5 3.6
Current account balance/GDP (2.3) (2.1) (2.6) (3.2) (2.2) (1.3) (1.7) (1.7) (1.7) (1.7)
Gross external financing needs/CAR plus FXR 120.6 120.7 128.2 120.5 123.5 119.5 127.0 129.4 128.7 126.7
Narrow net external debt/CAR 134.3 139.5 141.0 137.5 148.1 172.2 162.6 161.4 156.3 151.9
GG balance/GDP (7.6) (5.3) (5.5) (5.3) (9.6) (11.1) (11.1) (9.3) (8.4) (8.4)
GG net debt/GDP 77.9 78.5 77.3 83.3 86.0 100.2 104.1 106.3 107.3 108.0
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 49.8 51.4 52.9 54.3
Note: 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. Source: S&P Global Ratings.

Taiwan (AA/Positive/A-1+)

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 with 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 32.4 33.5 34.3 35.1
GDP growth 1.5 2.2 3.3 2.8 3.0 3.1 5.8 2.8 2.6 2.5
GDP per capita growth 1.2 2.0 3.2 2.7 2.9 3.3 5.8 2.8 2.6 2.6
Current account balance/GDP 13.6 13.1 14.1 11.6 10.6 14.2 11.9 11.2 11.0 11.0
Gross external financing needs/CAR plus FXR 62.3 58.5 59.9 61.9 62.7 57.7 59.8 60.9 60.9 60.9
Narrow net external debt/CAR (110.6) (119.3) (112.2) (103.9) (118.2) (136.0) (95.9) (92.9) (91.5) (90.4)
GG balance/GDP 0.1 (0.3) (0.1) 0.0 0.1 (1.0) (2.3) (0.9) (0.8) (0.7)
GG net debt/GDP 37.4 36.3 34.7 33.5 31.9 31.6 31.5 31.4 31.2 31.0
CPI inflation (0.3) 1.4 0.6 1.4 0.6 (0.2) 2.0 1.5 1.0 0.9
Bank credit to resident private sector/GDP 145.8 146.8 151.8 156.7 160.8 166.1 161.4 164.1 167.0 170.2
Note: 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. Source: S&P Global Ratings.

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 on Thailand reflects our view that the country's economy will gradually recover 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 15 years, will remain elevated over this period but will not deteriorate markedly to cause further social disruptions.

Downside scenario

We may lower the ratings if Thailand's 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 7.2 7.3 7.6 7.9
GDP growth 3.1 3.4 4.2 4.2 2.3 (6.1) 1.2 3.6 4.2 2.9
GDP per capita growth 2.7 3.1 3.8 3.9 2.0 (6.3) 1.0 3.5 4.0 2.8
Current account balance/GDP 6.9 10.5 9.6 5.6 7.0 4.0 (1.7) (0.2) 1.2 1.6
Gross external financing needs/CAR plus FXR 70.9 68.7 66.9 68.7 66.5 63.0 69.9 72.0 74.5 77.0
Narrow net external debt/CAR (21.2) (25.4) (26.9) (25.6) (28.8) (40.3) (28.9) (20.7) (15.6) (12.0)
GG balance/GDP 1.0 1.3 0.8 1.1 0.2 (3.6) (3.8) (3.5) (2.5) (2.5)
GG net debt/GDP 20.9 21.2 22.2 22.5 23.6 32.7 39.1 43.8 44.3 45.3
CPI inflation (0.9) 0.2 0.7 1.1 0.7 (0.9) 1.0 1.4 1.0 1.0
Bank credit to resident private sector/GDP 124.9 122.6 121.0 120.8 120.0 134.8 137.8 138.7 139.7 141.8
Note: 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. Source: S&P Global Ratings.

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.

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.

Downside scenario

We may lower the ratings 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 on a sustained basis.

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 3.6 4.0 4.4 4.8
GDP growth 6.7 6.2 6.8 7.1 7.0 2.9 1.9 7.5 7.3 6.7
GDP per capita growth 5.5 5.1 5.7 6.0 5.0 1.8 0.9 6.4 6.2 5.6
Current account balance/GDP (0.9) 0.2 (0.6) 1.9 4.0 4.3 1.6 1.8 1.9 1.9
Gross external financing needs/CAR plus FXR 94.3 98.1 97.3 93.1 90.4 85.9 85.7 83.7 82.8 81.9
Narrow net external debt/CAR 37.3 37.8 34.4 29.0 23.2 17.2 14.5 12.3 10.4 9.1
GG balance/GDP (5.0) (3.2) (2.0) (1.0) (3.3) (4.5) (4.5) (4.3) (4.1) (4.1)
GG net debt/GDP 39.8 41.3 37.1 33.7 30.7 33.5 36.3 36.7 36.9 37.3
CPI inflation 0.6 2.7 3.5 3.5 2.8 3.2 1.8 3.3 4.0 4.5
Bank credit to resident private sector/GDP 90.4 98.9 104.0 105.4 108.8 115.1 122.8 124.1 126.8 130.2
Note: 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. Source: S&P Global Ratings.

Editing: Jasper Moiseiwitsch

Digital design: Evy Cheung

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
YeeFarn Phua, Singapore + 65 6239 6341;
yeefarn.phua@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
Rebecca Hrvatin, Melbourne + 61 3 9631 2123;
rebecca.hrvatin@spglobal.com
Ruchika Malhotra, Singapore + 65 6239 6362;
ruchika.malhotra@spglobal.com

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