Moody's skeptical on Asia's growth outlook

Moody's skeptical on Asia's growth outlook

SINGAPORE (Dow Jones): Sovereign credit ratings in Malaysia, Thailand and Indonesia won't return to single-A status anytime soon given the weak prospects for sustainable economic growth, says ratings agency Moody's Investors Service.

Moody's is "generally positive" with regard to sovereign credits in the region, but "remains skeptical in the medium term" about economic prospects in Asia, Moody's chief U.S. credit officer Kenneth Pinkes said Monday. He was speaking at a seminar at the World Economic Forum in Singapore.

Moody's currently rates Malaysia Baa3 with a positive outlook, Indonesia is rated B3 stable and Thailand stands at Ba1 with a positive outlook.

"The acute phase of the crisis has passed... and the immediate risks of default have declined substantially," Pinkes said. But he added that there is a fundamental difference of opinion within Moody's over the impact of the currency crisis and the outlook for future growth.

The likelihood of a sustained recovery in Japan and a potential slowdown in the U.S. economy have created important question marks over Asia's future economic health, according to the credit officer.

He said a sustained economic recovery in Japan is unlikely if the government's massive fiscal stimulus measures aren't accompanied by industrial restructuring and large-scale downsizing of sub-set industries.

"At some point, sooner rather than later, the Japanese government will have to rein in expenditure," Pinkes said.

And there is a concern that a downturn in the U.S. will have widespread global ramifications. Although inter-regional trade is important, Asia is highly dependent on trade flows to and from the U.S., Japan and Europe.