According to an audience survey conducted on September 6 at the Emerging Market Summit Asia 2022 hosted by Moody’s Investors Service, inflation and supply chain disruptions pose the greatest risks for emerging Asia over the next 12 to 18 months.
The possible effects of rising interest rates and weaker economic growth came behind these two threats, according to a statement from Moody’s.
Southeast Asian economies will benefit more from supply chain diversification as more multinational corporations (MNCs) adopt the “China +1” strategy, according to Jacintha Poh, a Moody’s Senior Vice President. “Given the supply chain disruptions, multinational corporations (MNCs) have indicated a rising intention to relocate more manufacturing away from China,” she said. “However, we agree with panellists that China will remain embedded in many supply chains due to its comparative advantages.
In addition, supply shortages brought on by the military confrontation between Russia and Ukraine have caused thermal coal, oil, and gas prices to reach all-time highs.
Due to this, many Asian commodity producers reported healthy profits and cash flow, which they applied to debt repayment, investments, or shareholder rewards. According to Moody’s, these record earnings have helped producers despite regulatory hurdles and growing worries about the environment, society, and governance.
Despite the fact that commodity prices have fallen from record highs, Moody’s anticipates that supply growth will be moderate and that wintertime demand will remain high.
Longer term, the weaker outlook for global growth would lower demand for the majority of commodities.
Over the next 12 to 18 months, lessening financing activity and diversification in the financing of Asian developing market infrastructure will be caused by tighter credit conditions.
Compared to other regions, emerging markets will experience the greatest impact.
In order to overcome credit challenges and boost investor confidence, Moody’s predicted that multilateral development banks and governments will play an increasingly significant role in filling the funding gap for infrastructure projects in Emerging Asia.
This story was covered by IANS