Debt sustainability and financial stability are relatively well entrenched in the region, with contained government liquidity risks, broadly stable debt dynamics and generally sound external positions, the rating agency said in a report.
Gross domestic product (GDP) growth will stabilize near potential levels and outperform other regions, despite higher global inflation and tighter financial conditions, he said, while adding that most sovereign states have begun fiscal consolidation, but social pressures are slowing progress.
Moody’s expects output gaps to continue for India, which is in post-pandemic recovery mode.
Debt affordability has been entrenched in India, Malaysia and Thailand as they have a large base of institutional investors and banking systems, IANS cited in the rating agency’s report.
According to the report, high commodity prices will keep spending on food and fuel subsidies or other measures high, with little impetus to reduce support, especially for economies nearing elections in 2023. or early 2024, including Bangladesh and India.
Fiscal deficits for most governments in the region are likely to be at or near their debt stabilization fiscal balance. Debt burdens will continue to rise or stabilize at higher levels in countries like India and Malaysia, Moody’s said. The ratings agency said debt affordability would fall from generally robust levels as interest rates rise and would be manageable for most people in the region.
The main risks relate to weaker economic growth for a longer period in China; acute credit stress for lower-rated frontier markets that will continue to face increased liquidity pressures and currency depreciation; and domestic politics and geopolitics.
(with contributions from IANS)