Economy to slow in Asia amid high rates, fuel hike
Economy to slow in Asia amid high rates, fuel hike
Agence France-Presse, Kuala Lumpur
Asia's economic prospects for 2006 remain upbeat with recovering exports supporting regional growth but rising interest rates and fuel prices will cap growth, Fitch Ratings said on Thursday.
"Leading indicators imply Asian export growth will continue to recover in the first half of next year, particularly in light of new orders in U.S. manufacturing," said James McCormack, head of Asia sovereign ratings at Fitch.
But McCormack said Fitch forecasts a slight decline in the pace of regional gross domestic product (GDP) growth next year.
"China's growth is expected to dip below nine percent and higher interest rates in the U.S. should begin to dampen demand for Asian exports in the later part of the year," he said in a statement.
The Chinese economy grew 9.6 percent last year.
McCormack, who is based in Hong Kong, said excluding Asian economic power houses -- China and Japan -- Fitch forecasts Asian growth would decline to 4.5 percent in 2006, down from 4.7 percent this year.
"Given the possibility of even higher global interest rates and further spikes in oil prices, risk to regional growth are weighed disproportionately to the downside," he said.
McCormack said with exception, Malaysia, a net oil exporter, would continue to enjoy an expansion in the economy even with higher interest rates.
David Marshall, head of Asia-Pacific financial institutions said with the slightly slower GDP pace of growth Fitch expects Asian banks to operate in a "reasonable stable operating environment next year."
"Within Asia, only the Philippines is still grappling with unresolved economic and financial sector issues, with Japan and Korean banks performing well," he said.
Fitch said in the rest of Asia, the rating firm sees a mostly stable picture for bank credit quality.
Some banks in Indonesia have been impacted by asset quality concerns, notably Bank Mandiri, but Fitch sees these problems as limited and the overall banking sector to be in adequate financial condition, it said.