Global rating agency Fitch has said India, with limited exports to China, is less exposed to any additional pandemic-related disruptions there, but New Delhi’s high public debt leaves little headroom to respond to shocks.
However, more Covid-related disruptions in China could affect the creditworthiness of other sovereigns and territories in the Asia-Pacific (APAC) region through channels such as trade, tourism and financing, the agency said.
China is the biggest export market for most Fitch-rated APAC sovereigns and territories. It is also an important supplier of intermediate products whose availability could be interrupted, affecting regional exports. “Many Asian economies have a high degree of trade openness, amplifying the effect on their GDP,” the agency said.
The impact of will vary, depending on the countries. “Those at the lower end of the rating spectrum, such as Laos (CCC), Pakistan (B-/Negative) and Mongolia (B/Stable), would have multiple channels of exposure and their ratings may face downward pressure,” Fitch said.
In the wake of the Covid-19 pandemic and the Russia-Ukraine war, an additional shock from slower growth in China could also worsen credit risks in frontier markets, potentially eroding their political and institutional stability, it added.