Ukraine tensions unlikely to affect Philippine credit rating
MANILA, Philippines — Rising tensions between Russia and Ukraine would not make a huge dent on credit ratings in Asia-Pacific, including the Philippines, although its indirect impact on commodity prices and market disruption should be cause for worry, Moody’s Investors Service said.
Michael Taylor, managing director at Moody’s, said the Asia-Pacific region has 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.
He pointed out that the global oil and liquefied natural gas (LNG) prices are likely to rise sharply in the event of a conflict, a positive for the relatively few exporters in the Asia-Pacific region and negative for the substantially greater number of net energy importers.
“However, a mitigating factor is that several Asian economies have long-term supply contracts in place for LNG, which will limit the impact of fluctuations in the spot price,” Taylor said.
He also warned that trade effects are 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,” he said.
According to the debt watcher, financial market effects would have the largest near-term impact, such as the rise in widespread risk aversion and further deterioration of funding conditions for high yield issuers.
He said Chinese property developers would be particularly exposed to this risk given their large upcoming offshore debt maturities, although it is likely to apply to some degree to most high yield issuers in the region.
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 pandemic.