Standard & Poor’s Ratings Services, in its report titled, ?Politics and policy environment: Credit constraint for many, support for a select few in Asia-Pacific,? released on Monday, revealed that as the world economy shifts into a lower gear and liquidity becomes scarcer, the political and policy environments of Asia-Pacific governments, as well as their institutional qualities, will get closer scrutiny.
?This is because a government’s policy response can either attenuate or exacerbate the macroeconomic challenges,? it said.
The report highlighted that political and policy environments received less attention during the good times of the past several years when rising corporate profitability and soaring markets buoyed investor sentiment, while governments had scope to boost spending without diminishing their credit standing.
Many Asia-Pacific sovereigns have vastly improved their external liquidities, banking systems, fiscal consolidation and reduced their debt since the Asian financial crisis.
?However, a significant number of the 22 sovereigns rated by Standard & Poor’s in Asia-Pacific continue to face political risks like domestic instability, weak policy environment or in some cases external political risk, which either directly constrain their rating, or negatively affect other credit fundamentals,” said Agost Benard, credit analyst of Standard & Poor’s.