Weak global growth takes toll on emerging Asia's prospects - Fitch

MANILA, Philippines - Weaker global growth has taken its toll on emerging Asia’s own growth prospects due to dwindling exports, Fitch Ratings said in a new report released yesterday.

The debt watcher now expects emerging Asia to grow by 6.3 percent from its 6.7 percent forecast in December and slower than the 6.9 percent expansion last year. Growth is expected to pick up to 6.8 percent in 2013 and 6.6 percent in 2014.

Despite the downgrade, growth in emerging Asia, which includes the Philippines, will still outpace that of the world, which is expected to post 3.3 percent expansion in 2012, 3.9 percent in 2013 before inching up to four percent in 2014.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr., however, maintained a positive outlook for the Philippines, stressing a healthy domestic demand will keep the economy afloat amid the downward revisions in forecast, which also affected the US.

“Weaker global growth has affected emerging Asian export growth, which weakened in the first quarter of 2012 at a pace not seen since 2009, although the most recent data show some recovery,” Fitch said.

“EMs (emerging markets) face slowing growth and macroeconomic policy or rebalancing challenges. EM economies would not escape unscathed from the fallout from severe events in Europe,” it added.

Fitch’s assessment came after the release of the International Monetary Fund’s Article IV consultation for the US, which among others, showed a downscaling of 2012 growth expectation for the world superpower to two percent from 2.1 percent.

Tetangco acknowledged these “downside risks”, saying the economy is not immune to risks.

“We are not saying our economy is immune to risks. We acknowledge downside risks to our growth remain, as our economic prospects are constrained mainly by external factors,” he said in a speech during the BSP’s stakeholders’ luncheon.

“The lingering sovereign debt crisis in Europe, the slow recovery of the US economy and the risk of a slowdown in China have dampened market confidence and heightened risk aversion on a global scale,” he added.

Tetangco, however, expressed optimism on the economy’s capacity to withstand external shocks given its “healthy domestic demand” driven highly by “robust consumption growth, acceleration of government spending and increased agricultural activity.”

“You have all these factors which we believe will support sustainable growth,” he told reporters after his speech.

The economy grew by a stellar 6.4 percent growth in the first quarter, the third fastest in the region next to China and Sri Lanka.

The BSP chief said investor confidence has caused a rebound in risk appetite which allowed the foreign and stock exchanges to reach new highs.

Still however there is no risk of asset bubbles forming, he said, adding however that the BSP is “reviewing regulations related to NDFs and SDAs.”