World Economy

Asian Growth to Normalize at 6.3%

Asian Growth to Normalize at 6.3%Asian Growth to Normalize at 6.3%

Asian economic growth is expected to normalize at 6.3% as pressures mount, debt-watcher Fitch Ratings said in its latest “Global Economic Outlook” report.

“Emerging Asia’s real gross domestic product growth should slow to 6.3% in 2016 as regional economic pressure continue to add to a challenging outlook,” Fitch said in an accompanying statement on Tuesday, GMA News Online reported.

Fitch said the slowdown is better understood as “normalization” rather than an “uncontrolled collapse... “We forecast emerging Asia as remaining the fastest-growing emerging markets region in 2016,” Fitch said.

In a separate email to GMA News Online, Fitch Ratings noted the 2015 growth figure for Emerging Asia was 6.5%.

Although not included in the Global Outlook Report, Fitch said it will be more thoroughly detailed in the upcoming “2016 Emerging Asia Sovereigns Outlook” to be published before the year is out.

The outlook for Asia-Pacific remains challenging with added economic pressures from the continued slowdown in the growth of China, the world’s second biggest economy.

Other factors which dampened the outlook were sluggish global trade and an expected rise in US rates resulting to dollar strength.

“The expected slowdown in emerging Asia, however, is likely to be driven almost entirely by China,” Fitch said.

Indian growth was forecasted to accelerate to 8% in the fiscal year ending March 2017 while emerging Asia excluding China and India is seen to grow by 5.2% in 2016 from 5% this year.

However, Fitch noted the high private-sector debt could potentially be a downside risk to regional growth.

China, Malaysia, Thailand, and Vietnam have the highest ratios of private-sector credit to GDP of any Fitch-rated emerging markets.

Fitch raised its outlook for the 2017 China growth rate to 6% from 5.5%, based on the latest five-year plan suggesting a growth target of 6.5% for 2016 to 2020.

“The Chinese authorities maintain significant resources and a capacity to avoid a disorderly deceleration.” Fitch said.

In broader Asia, Fitch noted the ratings outlook are “mostly stable” despite the general outlook amid mounting regional pressures.

“The risks of a financial crisis akin to 1997 are significantly mitigated. External balance sheets are stronger in the region; sovereigns rely less on foreign-currency funding than in 1996; and most countries now also benefit from flexible exchange-rate regimes,” Fitch said.

According to Fitch, macroeconomic policy responses have also helped to buffer credit profiles such as the case in Indonesia and Malaysia which stand out as relatively more exposed to external risk factors compared with other economies such as the Philippines and Vietnam.

In terms of global growth, Fitch sees the global growth to pick up only slightly next year as issues such as lackluster trade and investment growth.

However, major advanced economies such as the United States, Eurozone, UK, and Japan “seem to have emerged relatively unscathed” compared with other key emerging markets this year.

“We forecast global growth to accelerate to 2.6% in 2016 and 2.7% in 2017 from 2.3% in 2015,” Fitch said.