S&P: Asia braces for hard times

The report, titled "Asia-Pacific Sovereigns Brace Themselves For Headwinds From US," said domestic demand and intraregional trade are expected to substantially counter the direct effects of falling US import demand. However, Asia-Pacific economies will also have to contend with the risks posed by elevated energy and food prices, tight global liquidity, and the increasingly discussed possibility of European economies succumbing to the slowing growth momentum.

 "The unfolding global economic and financial conditions leave limited scope, if any, for rating upgrades in the region in the year ahead," said Standard & Poor's credit analyst Agost Benard.

 Nevertheless, given still fairly robust endogenous growth prospects for the region as a whole, the existence of fiscal or monetary policy capacity to mitigate the impact, and for the least developed sovereigns, solid donor support, most regional sovereigns should weather the storm without negative rating action.

 "However, for slightly more than a quarter of the region's countries, including Pakistan, Taiwan, Thailand, and Sri Lanka, the ratings or outlook are susceptible to downward revisions given existing weaknesses. Yet, in many cases, the greatest risk stems perhaps not from the recession itself but from possible policy missteps by government when faced with the fallout of a US, or possibly global, slowdown. These could exacerbate problems, especially in countries with relatively weak fiscal and external positions, and where market distortions are prevalent," he cautioned.

- The Nation