Vietnam, Philippines, other Asia-Pacific sovereigns face credit downgrades from flood risk if they fail to adapt: Fitch
- ‘Many’ sovereigns in south and southeast Asia are at risk of negative rating action, with Singapore as the exception, the company says
- International financing for adaptation and green transition purposes is likely to fulfil only a small portion of overall funding needs, Fitch says
Countries in south and southeast Asia are the most exposed to flooding risks in the Asia-Pacific region, and sovereigns with a lower capacity to adapt are likely to face negative rating pressure, according to Fitch Ratings.
Flooding, one of the most common types of natural disaster, could lead to significant economic losses and degraded ratings for some Asia-Pacific sovereigns, the company said in a report on Thursday.
“Sovereigns more vulnerable to physical risks, with weak adaptation capacity, are likely to be under negative rating pressure,” the report said. “This puts many sovereigns in south and southeast Asia at risk of negative rating action, with Singapore as the exception.”
Most southeast Asian countries are island economies or have long coastlines, leaving them highly exposed to coastal flooding, according to the report. Sea levels have been rising in southeast Asia for several decades, leaving low-lying economies in the region vulnerable to coastal flooding and putting ecosystems that are built around water at risk.
Sea levels in the Philippines have risen by between 5.7mm and 7mm per year in some areas, double the global average from 1951 to 2015, according to the World Bank’s climate and development report for the country.
“Sovereigns in southeast Asia are highly exposed to physical risks from climate change,” said Sagarika Chandra, director of Asia-Pacific sovereigns at Fitch Ratings in the report. “Flooding in particular is a key vulnerability for those sovereigns.”
