KUALA LUMPUR: The Asia-Pacific (Apac) region will face the spillover effects of the Russia-Ukraine war as there are growing risks to the global economy that is weakening regional growth.
In a statement yesterday, Moody’s Investors Service said the region faced “weaker growth, higher inflation and financial market uncertainty” that will worsen pandemic-related economic scarring.
Despite relatively small direct economic and financial linkages with Russia and Ukraine, Moody’s assistant vice-president and analyst Nishad Majmudar said many Apac economies would face heightened macroeconomic risks.
stemming from the shock to global commodity prices and constrained access to industrial metals.
“Several economies risk backsliding on debt consolidation,” he added.
Besides that, Moody’s noted that the strong sanctions imposed on Russia last month would cause further downside pressures to global trade, growth and access to raw materials.
“Higher commodity prices will weaken credit conditions for some utilities, transportation and other fuel-intensive sectors, but oil and gas exploration and production companies and some agricultural producers will benefit.
“And APAC economies’ constrained access to industrial raw materials from Russia and Ukraine will have indirect effects for companies involved in the production of semiconductors, electronics, autos and electric vehicle batteries, through higher prices of nickel, palladium and aluminum,” it said.
Elaborating further, Moody’s added that market volatility and currency depreciation pressures in the event of a prolonged military conflict would also hurt the credit quality of sovereigns and speculative-grade companies with a significant dependence on foreign-currency commercial funding and high near-term refinancing needs.
Although some governments that have a vocal stance against Russia’s invasion may be susceptible to financially motivated cyberattacks, it added that cybersecurity and sanctions compliance risks are low for APAC issuers.