Fitch: Stabilisation in Emerging Asia Could Be Short-Lived
OREANDA-NEWS. Signs of macroeconomic stabilisation in China and a return of capital inflows following dovish signals from major global central banks helped buoy Emerging Asia in 1Q16. However, fundamental challenges - present to varying degrees across most of the region - of high and rising private-sector leverage and weakened external buffers have not gone away. Another downshift in the global backdrop could expose these vulnerabilities again.
The Bank of Japan's move to impose negative interest rates on a portion of bank reserve balances on 29 January 2016 has not forestalled a sharp appreciation of the Japanese yen. In the real economy, surveys show business deflation expectations have intensified. Developments increasingly call into question the ability of the authorities to deliver a sustained increase in real and nominal GDP growth rates, which in turn increases the challenge of achieving fiscal consolidation.
The "Asia-Pacific Sovereign Overview 1Q16" report provides summary credit views on all 19 Fitch-rated sovereigns in the region.