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Thailand, Malaysia, the Philippines and Indonesia are cushioned by "strong domestic fundamentals" ensuring that the slowdown has a limited impact, said a report issued by the ratings agency.

"The increase in exports to the intra-Asia region remained robust and offset the drop in exports to the US" last year, said Asia-Pacificchief economist Subir Gokarn. "Relatively lower inflation and interest rates in the past two years, combined with increased incomes due to favourable terms of trade and healthy remittance inflows, have boosted domestic consumptions and investment."

"Major risks to growth include a severe recession in the US or a more severe fallout of the financial crisis," Gokarn said. "Uncertainty with respect to oil prices and food supply shortages will threaten inflation and could likely hit private spending and investment, and therefore economic growth," he noted.

The stance of central banks will shift between neutral and easing depending on how rapidly the region arrests its domestic food shortage problems, said S&P.

"Central banks' primary objective, in the current scenario of appreciating domestic currencies, should be to protect price stability," the report said. "Currencies are expected to appreciate further in 2008, although not as sharply as in 2007."

Pressures emanate from the expanded US dollar weakness, local governments' measures to boost foreign direct investment, and possible impact from an appreciation of the Chinese yuan, the report said.

Deutsche Presse-Agentur