India will continue to post good growth despite subdued prospect for the Asia Pacific region amid expected rise in US rates, dollar strength, and lower commodity prices, Fitch said while retaining India’s rating.
“India and Vietnam have favourable macroeconomic prospects, partly reflecting lower exposure to some of the negative pressures affecting the region; however, weaknesses in their public finances have deterred us from taking positive ratings action,” the report said.
Gobal rating agency has retained the India’s sovereign rating at BBB-/Stable — the lowest investment grade.
Fitch expects Emerging Asia growth to slow to 6.3 per cent in 2016 from 6.5 per cent, driven almost entirely by a projected slowdown in China.
Excluding the two giants China and India, the region is projected to expand 5.2 per cent in 2016 from 5 per cent, the fastest of any emerging region, it said in its report ‘Emerging Asia Sovereign Outlook 2016’.
It further said emerging Asian external balance sheets are generally stronger than in 1996, the year before the Asian financial crisis broke.
“Sovereigns are generally much less reliant on foreign-currency financing, and many countries now have more flexible exchange-rate regimes in place of the more prevalent use of explicit pegs before 1997,” it said.
This gives authorities greater scope to let exchange rates act as a buffer today compared with the mid-1990s, it said.
Talking about the headwinds, the report said “dollar strength in the context of an expected rise in US rates, still-sluggish global trade growth and lower commodity prices pose a challenging set of circumstances for Emerging Asia in 2016 – which partly explains why the high growth rates of the mid-2000s look out of reach.”
The US Federal Reserve is largely expected to make its first rate hike in almost a decade during its upcoming December 15-16 meeting following recent positive US jobs data.
[Source:- The Indian Express]