Tsunamis won't change S&P's Asian debt ratings

Tsunamis won't change S&P's Asian debt ratings

Bloomberg, Singapore

Asian nations hit by Indian Ocean tsunamis won't have their debt ratings changed because reconstruction efforts will limit the impact on their economies and international aid will ease the burden on government budgets, Standard & Poor's said.

The company rates Indonesia, India, Thailand and Malaysia, which are among countries where more than 50,000 people died in tsunamis triggered by a magnitude 9 earthquake off the coast of Indonesia.

It doesn't rate Sri Lanka and Maldives.

"The effect on the economies of South and Southeast Asia will be muted by the inevitable rapid reconstruction of the devastated areas," Ping Chew, a Singapore-based director and analyst at the ratings company, said in a statement issued on Wednesday from Melbourne.

"The human losses are tragic and huge, but the dents to the countries' gross domestic product will be smoothed by the spike of investment for reconstruction, and the return of tourism to most areas," he said.

Tourism, which is the biggest economic casualty in the region, especially in Sri Lanka and the Maldives, will bounce back in the medium term, the statement said. Agriculture and fishing industries dislocated in most of the affected countries are only a small part of their economies, it said.

"The fundamental economic and financial structures of country sovereigns will continue to remain very much intact," Chew said.

S&P on Dec. 22 raised Indonesia's long-term foreign currency rating by one step to B+, four levels below investment grade, citing the "declining debt and debt-servicing burden" and increased stability in Southeast Asia's largest economy. The ranking puts the country on par with Pakistan and one level above Venezuela.

On Aug. 26 S&P raised Thailand's long-term foreign currency debt rating one level to BBB+ with a stable outlook. The assessment is two levels above the lowest investment grade, and on a par with the rating for China.

The New York-based rating company on Aug. 23 raised India's long-term outlook to positive from stable. It rates India's external debt at BB, two levels lower than investment grade. A positive outlook means the rating is more likely to be raised than lowered.

Last year S&P designated Malaysia A-, the seventh-highest investment grade.

"Thailand's fiscal position is robust; Malaysia isn't too bad," Chew said in a phone interview.

"Indonesia is under some strain but it's not a big amount in terms of the budget."

As much as Rp 1.35 trillion ($145 million) is needed in next 12 months for providing basic help for the victims, such as food, clothing, water and shelters, Indonesian Vice President Jusuf Kalla told foreign ambassadors in Jakarta on Wednesday.

Indonesia needs about Rp 10 trillion to rebuild roads, homes, power systems and other infrastructure in Aceh province. That figure may double as the damage along the west coast of Aceh, inaccessible by road, is fully assessed.

"Damages are way worse than we earlier predicted," Coordinating Minister for the Economy Aburizal Bakrie said.

The government said on Tuesday it may ask international lenders such as the World Bank and Asian Development Bank to switch allocation of as much as $3 billion in undistributed loans to help the victims.