In a paper discussing the impact of the US-Iraq war on global economies, S&P said war would worsen the fiscal risks already faced by the US and this would have a cascading effect on economies that depend on it.
"Should war break out, the creditworthiness of all the rated sovereigns in the Middle East would change," S&P said. "Countries that rely heavily on commercial cross-border financing, however, may be more at risk," it added.
S&P said that sovereign ratings that already have a negative outlook would be in particular risk of downgrade, namely: Brazil, Guatemala, India, Israel, Italy, Jamaica, Japan, Morocco, the Philippines and Ukraine.
According to S&P, countries like the Philippines, Morocco, Turkey and Lebanon were entering this troubled period with problematic fiscal positions and they face downgrades if their deficits persist at their current levels.
S&P said public finances were especially fragile in Lebanon and Turkey. Without a successful fiscal adjustment, the credit rating agency said these countries will default.
"Morocco and the Philippines enter this potentially troubled period in a stronger position but they too face downgrades if deficit persists at their current levels," S&P said.
Philippine finance and monetary officials criticized S&P for what they said was a sweeping and short-sighted evaluation, saying that the credit rating agency’s statements were "irresponsible."
Finance Secretary Jose Isidro Camacho said S&P was being "myopic" by making an evaluation based on what could be a short-lived situation. "For them to make such a credit evaluation is short-sighted," he said.
National Treasurer Sergio Edeza, who is in charge of most of the country’s borrowing, said that the impact of the US-Iraq war would be more significant on countries with large exposure.
"It also depends on how real the threat becomes," Edeza said. "While the situation is uncertain, statements like those become irresponsible. They are plunging the country to bigger problems when it should not."
Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura was more pragmatic, saying that S&P’s latest comments would make the country’s borrowing more expensive.
"Worse, it would make it more difficult to us to raise funds," Buenaventura said.