India and two of its neighbours, Pakistan and Sri Lanka, are expected to stand out with higher fiscal deficit levels in 2013 while most countries in the Asia-Pacific will show improvement on this profile, according to rating agency Moody’s.
With the ongoing fiscal consolidation efforts, it said the median fiscal deficit for the region was likely to improve to 2.6 per cent of GDP from 2.8 per cent in 2012. The ratio had shot up to 3.9 per cent of GDP for the region in 2009, at the height of the global financial crisis.
India, Pakistan, Sri Lanka and Japan are all expected to maintain fiscal deficits around double the region’s median. Also, their general government debt levels might stay in excess of 60 per cent of GDP, says Moody’s.
On India, it said fiscal improvement would depend on the extent to which GDP growth revived and yielded higher tax revenue. A stable investor base of domestic financial institutions and restrictions on capital investment abroad ensure availability of domestic funding for government debt, it said.
Moody’s rating for India’s government bonds is Baa3. The outlook is negative. For the Asia-Pacific, the improvement in deficit levels and robust nominal GDP growth will help maintain the downward trajectory of general government debt. This is expected to decline from a median of 42.7 per cent of GDP in 2011 to 40 per cent by end-2013, says Moody’s.
