India and Indonesia could see their credit ratings lowered if their governments fail to halt the current slump in investor confidence towards the countries, Fitch ratings said on Thursday.
Fitch currently rates both India and Indonesia BBB- with a stable outlook but the recent sell-off in emerging markets, sparked by worries of a scaling back of cheap U.S. financial stimulus, has raised the pressure on the countries.
The firm said the developments were not “a trigger for rating action at this point,” but said authorities in both countries would have to restore financial stability.
“Rapid private-sector credit growth, widening fiscal deficits or sustained higher inflation could lead to a broader and more sustained loss of confidence among investors.”
“This could potentially undermine economic and financial stability, and ultimately lead to negative rating action,” Fitch said.