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HomeTourismAPAC Sovereigns Vulnerable if China Sees Further Covid-19 Outbreaks

APAC Sovereigns Vulnerable if China Sees Further Covid-19 Outbreaks

Fitch Ratings assumes China’s “dynamic zero-Covid” policy will remain in place well into 2023. Mass testing and localised controls should prevent the re-imposition of economically disruptive lockdowns in 2H22. However, if there is additional pandemic-related disruption in China, it could affect the creditworthiness of other sovereigns and territories in APAC through channels such as trade, tourism and financing.

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.

Weaker near-term regional growth prospects would weigh on sovereign credit metrics. Fiscal consolidation could be delayed or reversed due to slower growth or the use of fiscal stimulus to offset external headwinds. In…

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