Going forward, some Asian governments may face challenges from high levels of household and public-sector enterprise debt, and domestic politics, but the outlook for the region is largely stable with a slight upward bias -- Moody's has upgraded two sovereigns over the past six months, and two ASEAN countries currently have positive outlooks on their ratings.
While the tapering of stimulus by the US Federal Reserve is constraining capital flows into Asia Pacific, most countries are well-placed to deal with resulting higher cost and reduced availability of international funding. Still, such conditions could prompt tighter fiscal policies in parts of the region.
Industrialized nations have strengthened over recent months. But China (Aa3 stable), the most dynamic large economy in the region is facing new challenges as the authorities attempt to curb credit growth and orchestrate a transition to a less investment-intensive growth model. A consequence will likely be a weaker rate of economic expansion, which will dampen the performance of its Asian neighbors.
In some countries, there has been a substantial build-up of debt among public-sector enterprises and households. These debts could constrain economies' ability to grow and could in an extreme scenario necessitate official intervention, putting a burden on government balance sheets.
Upcoming and ongoing elections provide the potential for new administrations to capitalize on fresh mandates to implement structural reforms in some countries. But continued political turmoil in Thailand (Baa1 stable) raises the risk of a protracted period of weak growth.
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