Fitch retains stable outlook for Sri Lanka; puts three others on negative outlook

Saturday, 11 January 2014 07:55 -     - {{hitsCtrl.values.hits}}

Fitch said yesterday three of 17 self-rated Asia-Pacific sovereigns are on Negative Outlook, with the rest including Sri Lanka on Stable Outlook. The three countries are Japan, Malaysia and Mongolia. Releasing the Asia pacific Sovereign Overview January 2014 report, Fitch Ratings the Stable Outlooks for most of the sovereigns illustrate Fitch’s view that the region can weather foreseeable pressures in 2014, including China’s rebalancing and Fed tapering without systemic stress. Fitch’s Asia-Pacific Sovereign Overview provides summary credit views on all 17 Fitch-rated sovereigns in the region. An accompanying report, “2014 Outlook: Emerging Asia Sovereigns” looks at regional themes affecting the nine Fitch-rated emerging market sovereigns. In retaining stable outlook for Sri Lanka Fitch said support to the rating is given by the relatively strong growth, a comparatively high level of human development, and a solid payment record. Fitch’s rating on Sri Lanka foreign and local currency is BB-. It said on key rating drivers the upside was sustained improvement in both the public and external finances whilst the downside is the intensification in external financing risks, an extended period of overheating, or a significant deterioration in the public finances. Key assumption is political landscape remains broadly stable, and no renewal of the civil conflict that lasted 26 years and ended in 2009. On public finances and external finances Fitch’s status on Sri Lanka is “weakness” though trend is stable. It remains neutral on macroeconomics and structural issues whilst maintaining stable trend. Fitch said Sri Lanka’s fiscal deficit (Fitch estimates 5.8% of GDP in 2013) and government debt burden (77.2% of GDP in 2013) remain relatively high, although the 2014 budget signals commitment to medium-term debt reduction and an ability to maintain a gradual fiscal consolidation trend The external finances form a weakness, with a persistent but narrowing current account deficit and higher net external debt (36.6% of GDP) compared with peers also rated in the „BB- category (on average, 22.8% of GDP).