Sri Lanka among highest-risk financial systems: Fitch

Dec 23, 2011 (LBO) – Rapid credit growth and rising asset prices has put Sri Lanka among the highest-risk financial systems, according to a new report by Fitch Ratings which has cut its growth forecast for emerging Asia. Asian economies were not immune from the financial crises in the industrialised countries.

Fitch has cut its forecast for emerging Asia’s 2012 growth to 6.8 percent for 2012, from 7.4 percent estimated in June 2011.

“This reflects both the deterioration in the outlook for the world economy and the lagged impact of policy tightening in some countries, including the region’s two giants, China and India,” the report said.

“Both China and India face a combination of slowing activity and stubbornly high inflation, underlining the risks that can arise from allowing inflation to rise above desired ranges.” The report on the Asia-Pacific sovereign credit outlook said there were growing concerns about bank credit in the region.

“While many advanced economies de-lever, the speed of credit growth and rising asset prices has led to Asia-Pacific harbouring four of the world’s nine highest-risk financial systems,” Fitch said.

“Hong Kong and China were joined by Indonesia and Sri L