MANILA - The Philippines was cited as one of the countries most vulnerable to the risks, financial or otherwise, of climate change in the Asia-Pacific region, according to a report released by Standard & Poor’s (S&P) on Friday.
Others on the S&P list were Vietnam, Bangladesh, Fiji, Papua New Guinea and Indonesia.
“Their vulnerability is in part due to their reliance on agricultural production and employment, which can be vulnerable to shifting climate patterns and extreme weather events, but also due to their weaker capacity to absorb the financial costs,” S&P said.
The credit watcher, which just recently upgraded the Philippines to a notch above the minimum investment grade, said global warming was a “mega-trend” that will affect sovereign credit risk through this century.
“Alongside the effects on societies of their aging populations, the impact of climate change, specifically global warming, will put downward pressure on sovereign ratings,” S&P said.
The credit watcher also cited the recent effects of the destruction wreaked by Supertyphoon Yolanda (international code name Haiyan) on the Philippines economy.
“Typhoon Haiyan hitting the Philippines in November 2013 has been a powerful and hugely destructive reminder of this trend,” S&P said.
The effect of climate change, according to S&P, will impact on sovereign creditworthiness—implying a possible negative impact on economic growth, external performance and public finances. Climate change is also seen to contribute to the rising global rating inequality, as it will also likely affect poorer and lower rated sovereigns the hardest. S&P also said weather-related losses have risen most significantly in Asia and North America in the past years.
“So far, Standard & Poor’s has not revised the rating of a sovereign as a consequence of an extreme weather event. We have taken a view that the size of devastation, while large in absolute terms, has not been sufficient to impact a rating overall,” S&P said in its statement.
“However, assuming that extreme weather events are on the rise in terms of frequency and destruction, how this trend could feed through to our ratings on sovereign states bears consideration,” it added.