Further credit rating upgrades not on horizon

The chances of Asia Pacific countries winning further credit rating upgrades in the coming year have slimmed, reflecting the region’s vulnerability to external financial crises that have little to do with economic fundamentals.

Fitch Ratings in a report on Monday said the region still stands out as the fastest-growing part of the world. However, recent events showed that individual countries were still at the mercy of forces beyond their control.

“Market volatility in December 2014 could be a foretaste of what is to come in 2015 as the [US Federal Reserve] moves toward raising interest rates while other major central banks may ease policy further,” the firm said.

The US dollar rose to its highest level in nearly a decade against major currencies such as the euro and the yen late last year as the American economy roared back to life. The US economy beat estimates as it grew by 5 percent in the third quarter of 2014, the fastest in 11 years.

Foreign capital continued to drain away from emerging markets in the region as investors moved back to the US, weakening currencies and leading to higher borrowing costs. Apart from the US economy’s resurgence, geopolitical concerns in Russia also resulted in heightened risk aversion among global investors.

Eight out of 10 Asia Pacific countries, the Philippines among them, rated by Fitch have stable outlooks. This implies that ratings are likely to stay the same for the next year and a half. Two—Malaysia and Mongolia—are on negative watch, which means a downgrade is likely in the same time frame.

The Philippines is rated by Fitch at its minimum investment grade or one notch behind the ratings given the country this year by the two other major rating agencies, Moody’s Investor Service and Standard & Poor’s.