Near-Term Concerns, But Structurally Solid

BMI View: Our core macro scenario for 2011 - specifically, a China-induced regional slowdown- is unlikely to derail Asia's sovereign creditworthiness too severely. While we expect some fiscal slippage (and by extension sovereign risk rating weakness) in the near term, we remain confident in the structural strength of Asia's sovereign balance sheets. Fiscal deficits and external debt loads are not only much lower than in previous decades, but are also much healthier relative to developed world economies. This should keep inward capital and international investment positions anchored over the medium term. The recent stability in Asia's credit spreads, despite headline risks emanating from Europe, is testament to Asia's improved sovereign standing.

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