This is because a government's policy response can either attenuate or exacerbate the macroeconomic challenges.

In the report titled 'Politics And Policy Environment: Credit Constraint For Many, Support For A Select Few In Asia-Pacific,' S&P said political and policy environments received less attention, during the good times of the past several years, when rising corporate profitability and soaring markets buoyed investor sentiment, while governments had scope to boost spending, without diminishing their credit standing.

It noted that many Asia-Pacific sovereigns have vastly improved their external liquidities, banking systems, fiscal consolidation and reduced their debt since the Asian financial crisis.

'However, a significant number of the 22 sovereigns rated by Standard & Poor's in Asia-Pacific continue to face political risks, such as domestic instability, weak policy environment, or in some cases external political risk, which either directly constrain their rating, or negatively affect other credit fundamentals,' said S&P's credit analyst Agost Benard.

In eight of the 22 rated sovereigns in Asia-Pacific, political or policy risk feature as an explicit constraining factor for their creditworthiness.

Only two Asia-Pacific sovereigns appear to possess the kind of political stability where its longevity and proven track record make political stability an explicit credit-supporting factor.

'It is likely no coincidence that these two sovereigns, Australia and Singapore, are also the only ones in the region having the highest credit rating of 'AAA',' Mr. Benard said.

'Clearly, sovereigns facing the greatest risk to ratings from their political and policy environment are those where administrative and institutional weaknesses coexist with severe domestic political instability, which may include security risks or outright civil conflict,' Mr Benard noted.

'Fiji, Sri Lanka, Papua New Guinea, and Pakistan fall into this category, where political risk is highest, and not only a credit constraint in itself, but it also poses the greatest risk to credit fundamentals.'