Growth to get a boost with vax and supply chain easing

Feb 2, Kuala Lumpur — Moody’s Investors Service says in a new report that the credit trend for Asia-Pacific companies will remain broadly stable through 2022, supported by smoother and more sustained global economic growth.

“Significant progress on vaccination and the availability of booster shots have lessened the pandemic’s threat, allowing for more social and economic activities to normalize.

Meanwhile, the global supply and demand equilibrium will likely be restored by stronger household spending, inventory restocking and suppliers’ efforts to address the supply bottlenecks in the last few quarters,” says Clara Lau, a Moody’s Senior Vice President and Group Credit Officer.

Moody’s estimates that the GDP growth of G-20 advanced and G-20 emerging economies will grow at 4.2% and 4.8%, respectively, in 2022.

Fiscal policies across countries will shift from accommodative to strengthening long-term growth potential and debt sustainability.

And central banks will gradually tighten monetary policies and normalize interest rates to remove the liquidity support extended during the pandemic, without impeding growth.

The share of ratings with a stable outlook in Moody’s APAC corporate portfolio was around 81% at the end of 2021, higher than the 72% at the end of 2020.

Ratings

The share of ratings with negative implications (meaning a negative outlook or a review for downgrade) dropped to 16% at the end of 2021, lower than the 26% at the end of 2020.

Negative rating actions outpaced positive ones in 2021, with 124 negative actions compared with 65 positive actions.

Chinese property developers accounted for 42% of all negative rating actions, because of the industry’s market and liquidity challenges.

Gaming and consumer services were also among the most pressured sectors, as pandemic restrictions to contain resurgences posed uncertainties to their recovery.

Conversely, metals and mining had the most positive implications, on the back of rising commodity prices and demand from recovering economies.