Supply side strains in the Asia-Pacific region will remain “elevated” at least until the end of 2022, with energy and raw material cost inflation posing the biggest cost pressures for corporate debt issuers, followed by the effects of transportation bottlenecks, according to Moody’s Investors Service.

“The Russia-Ukraine crisis and continued pandemic-led disruption will hold back supply-side recovery, despite initial signs of a gradual pickup in APAC. All corporate sectors in the region will be exposed to cost risks from supply side pressures to varying degrees through at least the end of this year,” said Lillian Li, a Moody’s VP and senior credit officer.

“In addition, pandemic related mobility restrictions remain strict in parts of the region and are creating new uncertainties,” she added.

Other supply side strains include labour shortages and wage pressures, transportation bottlenecks and cost pressures plus production capacity constraints.

Price pressures are particularly acute for the region’s automotive, chemicals, energy and steel sectors, followed by the construction, metals and mining, property, technology hardware, semiconductor, telecommunications and utilities sectors.

“Companies’ resilience will depend on their ability to offset cost pressures through price increases for downstream customers or end consumers, or through cost structure optimisation,” Moody’s said.

Its sectoral exposure comparison shows different pressure points for APAC compared with the US (rated Aaa stable) and EMEA. Wage pressures are less of a cost concern for many APAC industries because the region’s slower economic recoveries have minimised the drift in labour cost inflation.

However, like their counterparts in the EMEA, two thirds of APAC corporate sectors are under moderate to strong cost pressures from rising energy and raw material costs. In contrast, US companies are under less pricing pressure in this area.