Worrying political developments in Thailand, Taiwan and the Philippines recently could slow growth in Asia, a Fitch Ratings Ltd executive warned yesterday.
Economic growth in emerging Asia was forecast to decline to 7 percent this year from 7.5 percent last year with an easing of exports in line with a slowing US economy, James McCormack, a Fitch senior director and head of Asia Sovereigns, told a one-day conference in Singapore.
"Notwithstanding ongoing regional integration with China, growth in Asia remains highly leveraged to external demand, and particularly the US consumer, whom we believe to be overstretched," he said.
"Asia's political backdrop has recently become less favorable for growth," McCormack said, citing the situations in the Philippines, Thailand and Taiwan.
"Those sovereigns in the midst of political turmoil also have the weakest growth rates in emerging Asia and further downward revisions to the growth forecast may be necessary," McCormack added.
Tension between Taiwan and China has been on the rise after President Chen Shui-bian (陳水扁) said on Feb. 27 that the National Unification Council would ``cease to function'' and its guidelines for unification wouldn't be implemented.
In Thailand, next month's snap election, which the opposition vows to boycott, will likely see Prime Minister Thaksin Shinawatra returned to power with a reduced majority which could delay plans to further liberalize the economy, Fitch said.
As for the Philippines, the unstable political situation which saw Philippine President Gloria Macapagal Arroyo declare a state of emergency after an alleged coup attempt last month is also a cause of concern given the country's urgent need to improve its fiscal position, Fitch said.
McCormack said that after numerous upgrades in recent years, it is time to assess whether emerging Asian sovereign ratings now fully reflected the region's strong external liquidity position.
"For several sovereigns, it is probable that continued foreign exchange reserve accumulation would not necessarily be viewed as supporting further upward rating momentum," he said.
Fitch Ratings in November affirmed Taiwan's long-term foreign currency and local currency ratings at A+ and AA, respectively -- both with a stable outlook, and Taiwan's short-term rating at F1 and the country ceiling at AA-.
Another ratings agency, Standard & Poor's, in December reaffirmed its AA- and A-1+ foreign and local currency sovereign credit ratings on Taiwan, with the outlook for the nation's debt staying negative.
"The outlook for sovereign creditworthiness hinges on the authorities' ability to maintain macro-economic stability and monetary policy credibility while implementing a demonstrated reform agenda aimed at increasing investment demand and external receipts," Fitch said yesterday.
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