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Third of Indonesian firms at ‘significant risk’ if Ukraine crisis escalates: Moody’s
In case of a global recession and a more severe “liquidity squeeze,” Moody’s Investors Service anticipates risks to more than a quarter of the firms it rates in the Asia-Pacific region – and a third in Indonesia.
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The skyline of Jakarta's Sudirman Central Business District (SCBD) is shown in this photo from Aug. 18, 2018. (AFP/Bay Ismoyo)
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n case of a global recession and a more severe “liquidity squeeze,” Moody’s Investors Service anticipates risks to more than a quarter of the firms it rates in the Asia-Pacific (APAC) region – and about a third in Indonesia.
In a study analyzing the impact of the Ukraine crisis on APAC nonfinancial companies, the rating agency has updated its baseline and downside scenarios.
“A small number of rated companies face material credit pressure under our baseline scenario because of refinancing risks amid current market volatility,” Moody’s said in a press release on the study published on Friday.
“However, under a more severe downside scenario, more than 27 percent are vulnerable, particularly speculative-grade companies and those with limited balance-sheet buffers or exposed to a supply chain shock,” said Moody’s associate managing director Chris Park.
The baseline scenario of the Russia-Ukraine crisis assumes that commodity shocks, higher inflation and interest rates will result in lower global growth through 2023.
“Even if ceasefires are negotiated, sanctions on Russia will remain in place through next year at least. Our downside scenario assumes that a recession in Europe, potentially caused by a suspension of energy trade between Russia and Europe, triggers a global recession and severe liquidity squeeze amid still-heightened geopolitical risks,” the agency warns in the study report.
The homebuilding sector, in particular Chinese developers, remains vulnerable because of a prolonged liquidity squeeze, according to the study. Many companies in the automotive, agriculture and retail sectors, too, will face material risk under Moody’s downside scenario.
