Emerging Asia leverage, capital outflows constrain policy space: Fitch

Jan 08, 2015 (LBO) – Emerging Asia’s private consumption has remained resilient in the face of weaker external demand but investment has slowed down more substantially, particularly in the private sector, Fitch ratings said.

The full statement follows

Fitch Ratings-Hong Kong-07 January 2016: Fitch Ratings says Emerging Asia’s (EM Asia) private consumption has remained resilient in the face of weaker external demand. However investment has slowed down more substantially, particularly in the private sector. The slowdown may not only reflect cyclical factors, but also lower potential growth for countries most economically linked to China.

High leverage and risk of capital outflows constrain the use of monetary policy as a countercyclical tool in some EM Asia economies. Fiscal policy could be a substitute where monetary policy is inflexible. Lower government deficits and debt levels could increase fiscal space, but politics and policy rules could also prove to be a barrier in practice.

The January edition of “Asia-Pacific Sovereigns Chart of the Month” is available at www.fitchratings.com or by clicking on the link in this media release.

Link to Fitch Ratings’ Report: APAC Sovereigns Chart of the Month Jan 2016 – Leverage, Capital Outflows Constrain Policy Space in Emerging Asia