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September 27, 2022

Phl, Asian countries can weather Russia-Ukraine conflict

Sovereign debt watcher Moody’s Investors Service sees the Philippines and countries in the Asia Pacific (APAC) region weather the rising tension between Russia and Ukraine.

Moody’s Managing Director Michael Taylor said Asia Pacific has a limited direct exposure to Russian or Ukrainian entities.

“As such we do not anticipate there would be any immediate or direct ratings impact from the situation in Ukraine. Nonetheless, issuers in APAC may not be immune to second round effects of a conflict. Among the possible transmission channels are commodities prices, trade effects and financial market disruption,” Taylor said.

However, the credit rating agency noted that the global price of oil and liquified natural gas (LNG) is likely to rise sharply in the event of a conflict which is a positive for the relatively few exporters in the region and negative for the substantially greater number of net energy importers.

A mitigating factor, Taylor explained, is that several Asian economies have long-term supply contracts in place for LNG, limiting the impact of fluctuations in the spot price,

The debt watcher also raised the issue on trade effects likely to arise from import diversion and diversification.

“There may be opportunities for commodities producers in Central Asia to increase supply to China. Supply chain bottlenecks would also be aggravated, adding to inflation pressures in the region,” Taylor said.

The financial markets are expected to bear the largest near term impact amid the Russia and Ukraine tension via rising widespread risk aversion and further deteriorating funding conditions for high yield issuers.

Moody’s has maintained the credit rating of the Philippines at Baa2 or a notch above minimum investment grade with stable outlook despite the impact of the COVID-19 pandemic.

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