Moody’s downgraded Hong Kong’s credit rating one notch to “Aa3” from “Aa2” on Monday, saying its view on the strength in the city’s institutions and governance is “lower than previously estimated,” Reuters reports.
The agency, however, moved its outlook to stable from negative.
“The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than Moody’s had previously assessed,” Moody’s said in a statement.
The agency also said that there has been a lack of clarity from Hong Kong’s government on its response to the direct council elections late last year that saw pro-democracy candidates win by record numbers.
“Pressures on Hong Kong’s institutions undermine its credit profile directly,” Moody’s added.
In a statement on Tuesday, the Hong Kong government said it strongly disagrees with Moody’s assessment and that is “deeply disappointed” by the downgrade decision.
“Although Hong Kong has faced the most severe social unrest since its return to the Motherland in the past seven months or so, the HKSAR Government, with the staunch support of the Central Government, has firmly upheld the ‘one country, two systems’ principle and handled the situation in accordance with the law to curb violence on its own to restore social order as soon as possible,” it said.
Moody’s said its stable outlook reflects Hong Kong’s superior fiscal strength and consistent macroeconomic stability.
The rating agency called the response by Hong Kong’s government to political demands by parts of the population and concerns about living standards, housing costs and equality of economic opportunities to be “notably slow, tentative and inconclusive.”
In September, Fitch downgraded Hong Kong’s rating to “AA” from “AA+”.
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