Leadership changes in South Korea, China and Japan bode well for a pro-growth approach in the region but soaring geopolitical tensions remain a potential obstacle to the leading Asian economies, Moody's Investors Service said Tuesday.
In general, sovereign credit fundamentals in the Asia-Pacific region are likely to stay resilient to both global headwinds in 2013 and monetary easing by the U.S. Federal Reserve, it added.
"At the same time, sovereign credit profiles in the region will likely continue to improve relative to those in most other regions," the global credit ratings firm said in its outlook for regional economies this year.
Moody's pointed out banking systems in the Asia-Pacific area are generally sound and well-positioned to continue to support growth without posing significant contingent risks to their respective sovereigns.
It expects China to avoid a hard landing with annual real GDP growth remaining at around 7.5 percent.
Moody's struck an upbeat note for growth-oriented policies by the new administrations in the three economic powers: South Korea, China and Japan.
"Leadership changes in the big three East Asian economies will be positive for pro-growth policies in the near term, although Japan in particular faces long-term challenges," it said.
Nevertheless, the agency noted, rising geopolitical tensions have emerged over the past year over maritime territorial disputes.
That "would have significant economic ramifications if not constructively managed," it warned.
Last year, Moody's raised South Korea's sovereign credit rating by one notch to Aa3, citing its strong fiscal position, economic resilience and reduced external vulnerability of the country's banks.
It also said the upgrade was affected by a relatively stable situation in North Korea after the nation embraced a young, untested leader, Kim Jong-un. (Yonhap News)
