Wednesday 23 November 2011

ASIA’S RESILIENCE

Finance Asia

ASIA CAN WEATHER THE GLOBAL STORM

Emerging countries in Asia should prove resilient again if the global economy worsens, according to a report published by Fitch Ratings this week.

Rupert Walker

FinanceAsia, November 23, 2011

Economies in Asia are well placed to withstand a further worsening of the global economy, according to a report released by Fitch Ratings this week. In general, healthy trade and fiscal balances, policy flexibility and their resilience in 2009 suggests that most countries in the region are well-protected against contagion from further shocks from Western Europe and the US.

The report — “Emerging Asian sovereign pressure points” — noted that Thailand combines high exposure to a global slowdown with limited scope for monetary policy stimulus, but in contrast, Indonesia has a track record of resilience to global economic shocks and has the most scope for a policy response. Meanwhile, China and India are less exposed to a global growth shock, but also have little tolerance for policy stimulus should things go badly wrong.

A sudden worsening in global market liquidity is likely to hurt Indonesia, Korea and Malaysia most, but would have a limited impact on China, Taiwan and the Philippines. But, “emerging Asian exposure to a sudden stop in external financing ... appears limited, with only Sri Lanka and India running deficits on their basic balances (current account balance plus net foreign direct investment inflows)”.

The report looked at several metrics to assess the potential exposure of emerging Asian economies and their sovereign credit-worthiness to a further deterioration in the global economy and heightened stress in the financial system. However, the rating agency stressed that these contingencies do not reflect its base case scenario.

Fitch pointed out that the threat to the real economy from a potential sharp worsening in the global economy can be determined through trade openness and the scale of the deviation seen in 2009 GDP growth compared with the preceding five-year average growth rate. The three countries that experienced the largest shock to growth — Malaysia, Mongolia and Thailand — are among the most open to trade in the region, while those least open to trade suffered smaller shocks to GDP growth in 2008 to 2009.

(...) [artículo aquí]

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