One Less Worry for Tsunami-Striken Nations

S&P says the impact on their economies won't be severe enough to have a negative impact on their sovereign credit ratings

Asian countries hit by the recent Indian Ocean tsunami won't see their sovereign credit ratings change, despite the extensive loss of life, property, and infrastructure, according to Standard & Poor's Ratings Services.

"The effect on the economies of South and Southeast Asia will be muted by the inevitable rapid reconstruction of the devastated areas," predicts credit analyst Ping Chew of Sovereign & International Public Finance Ratings. "The human losses are tragic and huge, but the dents to the countries' GDPs will be smoothed by the spike of investment for reconstruction and return of tourism to most areas," Chew adds.

Tourism is the biggest economic casualty in the region, especially in Sri Lanka and the Maldives given their narrow economic base and foreign-currencies earnings, but it will bounce back in the medium term. "Just as Bali in Indonesia survived the terrorist bombing in 2002, so Phuket in Thailand will survive the ravages of this terrible natural disaster."


  For most of the affected countries, agriculture and fishing industries dislocated are only a small part of the overall economy generally, with natural resources and manufacturing increasingly the dominant industries. The budgets of some countries -- the Maldives, Sri Lanka, Indonesia, and India -- will come under pressure, but except for Sri Lanka's, any impact shouldn't be of a major concern to Standard & Poor's Ratings Services.

International aid will help to alleviate the balance-of-payment pressures of the smaller nations affected, such as Sri Lanka and the Maldives.

In the past several years, Asian economies have persistently withstood several environmental, social, and economic shocks to record sustainable high growth. Concludes Chew: "The fundamental economic and financial structures of country sovereigns will continue to remain very much intact."

From Standard & Poor's RatingsDirect

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