ASEAN economies: Philippines are safe from risk in global slump, others NOT: Fitch

Thailand and Malaysia would be the most at risk among Asia's developing countries if there were a sharp deterioration in the global economy, Fitch ratings agency said Tuesday (November 22, 2011).

Indonesia is the least exposed and has a larger capacity to bring in stimulus measures should the world economy tumble sharply, analysts from the credit ratings firm said.

"Both Malaysia and Thailand look highly exposed and have constrained room for policy stimulus," said Fitch analyst Philip McNicholas, citing high debt levels relative to gross domestic product (GDP).

Due to its large domestic economy and its low debt-to-GDP ratio, Indonesia "is relatively the least exposed in the region," he said.

Southeast Asia's biggest economy was on track for a ratings upgrade within the next 12 to 18 months, McNicholas added, but a key test will be how well Jakarta weathers an economic slowdown.

Fitch currently rates it BB+ with a positive outlook.

"The ability to withstand the shocks would be very favorable for Indonesia's case," he said in a teleconference with journalists.

McNicholas said China and India also "do appear somewhat insulated" from external shocks, but have limited scope for policy stimulus now compared with the last global meltdown that started in late 2008 and lasted well into 2009.

Asian economies had rolled out massive spending packages that helped them weather that downturn better than other regions of the world, Fitch said.

Fitch analysts had looked at several indicators to assess the potential exposure of emerging Asian economies in the event of another steep global economic downturn or shock in the world financial system.

Should a severe credit crunch take place, "we see Malaysia, (South) Korea and Indonesia as some of the most exposed to a liquidity shock while China, Taiwan and the Philippines are the least exposed," McNicholas said.

But on the whole, emerging Asia "is relatively less exposed or has minimum exposure to" a severe pullback in global liquidity than other regions, he said.