Economic Loss in Asia Will be Muted and Continued Growth Likely, Report

Asia Pacific’s high-flying economies are likely to face more headwind in 2005, but they will be largely resilient to most shocks and cyclical corrections, said Standard & Poor’s in a commentary. “These economies and governments have bolstered their financial strength, especially their external positions, during 2003 and 2004, and are well placed to cope with most foreseeable shocks, including heightened interest and exchange rate adjustments,” said Standard & Poor’s. Correspondingly, the positive rating trends for Asian sovereigns might moderate in 2005, compared with the previous two years. The commentary, titled “Asia-Pacific Sovereign Outlook: Headwind May Slow Positive Rating Trend,” noted that GDP growth for many Asian economies in 2005 is likely to normalize towards their medium-term trend growth. Tragically, Asia ended 2004 on a solemn note, after tsunamis killed more than 220,000 people. However, with the exception of Sri Lanka, economic losses are expected to be muted, despite the huge human losses, according to Standard & Poor’s. Infrastructure might become operational only much later given earthquake and tsunami experiences in Japan. Tourism is the largest economic casualty, but it is likely to bounce back. Meanwhile, aid will alleviate spending and budget pressures. This disaster is unlikely to derail robust regional growth in 2005, but could slow reform momentum.


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