Asia Well-placed to Weather Global Economy Storm

By ERIKA KINETZ / AP WRITER

MUMBAI — There is more pain to come for Asia, as growth slows, defaults rise, and stock markets sink even lower, but the region will prove more resilient than most in withstanding the global economic downturn, Standard & Poor's said Wednesday.

"2009 will not be an outstanding year by any means, but it will reflect the region's resilience and collective ability to moderate fluctuations around a strong growth trend rate," Subir Gokarn, Standard & Poor's Asia-Pacific chief economist, said in a statement.

While the US and euro-zone economies will likely shrink in 2009—by 0.9 percent and up to 0.5 percent respectively—almost all Asian countries will continue to grow, albeit at a slower pace, he said.

Japan and Singapore are the only two Asian economies expected to contract, S&P predicted. Japan's economic growth will be flat to slightly negative, while Singapore's will contract by 0.5 percent to 1.0 percent, the credit rating agency said.

Resilient growth and strong demand in India and China, along with rising regional trade and enlightened, pro-growth policymaking will bolster the region, he said in comments to reporters on a conference call that were also stressed in a statement.

China will post 7.8 percent to 8.3 percent growth in 2009, down from 9.3 percent to 9.8 percent in 2008, and India will clock 6.5 percent to 7.0 percent growth next year, down from 7.3 percent to 8.8 percent, S&P projected.

However, companies will continue to find it difficult and expensive to raise funds, and the number of defaults will climb, the credit rating agency said.

"We're likely to see an increase in delinquencies and defaults for the full year ahead," Ian Thompson, S&P's regional chief credit officer said during the conference call.

Ratings with a negative outlook or a negative credit watch outnumber those with a positive bias by four to one, he added.

Companies that expanded aggressively and are highly leveraged or dependent on exports will be hardest hit, he said. Chinese real estate companies, South Korean construction companies, and shipping and consumer goods and services companies across the region are among the most vulnerable, he said.

In the coming months, regional equity markets could breach their October lows, before staging a mild recovery in the second half of next year, Lorraine Tan, S&P's director of equity research, said on the conference call.

"Although the economic and corporate news is likely to remain negative—and uncertainty still pervades the global financial system—we see that markets will have retraced in line with, and in some cases exceeded, movements in previous bear markets in terms of both value and time frame," she said in an statement.