Chennai, January 09. Credit rating agency Moody’s Investors Service said the credit rating outlook for government bonds in the Asia-Pacific region (APAC), including India, is stable for 2023. In its latest report, Moody’s said credit stability and financial stability in the region are relatively well correlated, with inherent sovereign liquidity risks, generally stable credit dynamics and generally sound external conditions. According to Moody’s, gross domestic product (GDP) growth will stabilize near potential levels and outperform other sectors, despite high global inflation and tighter financial conditions.
Most regimes have begun fiscal consolidation, but social pressures are slowing progress. As for India, which is in recovery mode after the pandemic, Moody’s expects the output gap to persist. The rating agency said the ability to service debt rests with India, Malaysia and Thailand as they have large institutional investor bases and banking systems.
According to the report, higher commodity prices will keep spending on food and fuel subsidies or other measures high, especially to reduce support for elections in 2023 or early 2024, including Bangladesh and India.
The budget deficit for most governments in the region is likely to be at or near their debt-stabilized budget balances. Moody’s said the debt burden of countries such as India and Malaysia will continue to rise or stabilize at a high level. The rating agency said credit affordability would generally decline from strong levels with rising interest rates and would be manageable for most in the industry.