Fitch Ratings yesterday revised its forecast for the nation’s economic growth to 4.3 percent for this year from 4.7 percent on slowing industrial production and exports, and to 4.8 percent for next year.
“It appears there is no avoiding a slowdown in emerging Asia, and [there is] evidence of weakness in the region’s largest economies, China and India,” James McCormack, head of the agency’s Asia-Pacific Sovereign Ratings, said on the sidelines of a Fitch seminar.
The region’s short-term outlook is deteriorating, based on synchronized GDP growth downturns in the US, Europe and Japan, McCormack said.
Although the economy has opened up and is considerably exposed to China, he said the nation’s short-term outlook was still mixed.
The electronics industry remained weak, McCormack said, with consumer confidence having fallen sharply this year.
Employment growth, however, along with stable exports to China and new orders secured by the manufacturing sector, spells good news for the economy, he said.
Fitch expected the medium-term outlook to be relatively good, given structural and political change and closer ties with China.
But McCormack expressed concern over the region’s rising inflation and said he expected central banks in the region to address the issue more aggressively, since interest rates in countries such as Vietnam, Sri Lanka and Mongolia remain low.
Fitch said the nation’s inflation should average 4.9 percent this year and 3.2 percent next year.
Another Fitch analyst said the domestic banking sector was not immune to the global economic slowdown.
Jonathan Lee (李信佳), senior director of Fitch’s financial institutions team, said “the credit cycle for the remainder of 2008 and 2009 will be tougher and banks will probably see their NPLs [non-performing loans] rise modestly.”
But Lee also said banks were in a better position to absorb potential external shocks, in spite of some corporate defaults earlier this year, after the NPL and gross charge-off ratios fell to historical lows at 1.54 percent last month and 86 basis points in the first half amid rising bad loan provisions.
Lee urged the government to continue to address the over-crowded financial sector by seeking to consolidate state-run banks, while accelerating deregulation and fostering closer ties with China to allow banks to tap into that market.
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