KUALA LUMPUR – Economies in the Asia Pacific (APAC) region are in better standing despite many of the countries still in expansion or recovering from COVID-19.
Moody’s Analytics stated that if conditions outside the APAC region continue to deteriorate, the risks of recession would increase especially since exports are a key growth driver and the US and Europe are vital sources of demand.
In a recently published research note, it said there will be increased pressure on domestic demand given that central banks in Asia are hiking tightening monetary policies.
According to the note, global businesses are getting increasingly anxious due to the heightened risk of recession. The weekly business survey conducted by Moody’s Analytics showed that sentiment has been on the decline since early 2022.
“There is not always a strong causal relationship between sentiment and the actual economy but with so much being thrown at households and businesses over the past two years, there is a greater risk that this persistent anxiety will contribute to a decline in hiring, investment, and also spending.
“This concern has grown in weight – corporate expectations for economic conditions six months ahead are anticipated to deteriorate markedly and are now at their lowest level since 2009’s global financial crisis,” it explained.
In a separate note, Moody’s Analytics stated that total debt-to-gross domestic product (GDP) ratios in the APAC region have remained substantially above pre-pandemic levels, despite the fact that some countries, such as Singapore, Malaysia, and Indonesia, would post lower debt ratios in 2021 than in 2020.
The note said it was partially due to the effectiveness in containing domestic COVID-19 cases while also keeping production lines open.
With regards to household debt, it stated that the government’s fiscal policies throughout Southeast Asia have offered aid to stabilise the household debt last year.
Despite that, the debt-to-GDP ratios in Malaysia and Thailand have remained the two highest in Southeast Asia and are both at risk of non-performance as interest rates normalise.
High household debt continues to be a major problem although there is a recent slowdown the pace of household debt growth while many Southeast Asian countries also face skyrocketing housing prices as hot money and market speculation continues to drive prices upward, the note added.
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