The tentative growth outlook of many of the large economies—most particularly the slowdown in China—is the single largest threat to the growth of emerging markets in the Asia Pacific, according to UK-based Fitch Ratings.
In the Philippines, the Bangko Sentral ng Pilipinas (BSP) said the effect of the slowdown in China is most evident in investments, as well as in the export sector.
In its first-quarter risk assessment of the Asia Pacific released on Monday, Fitch said China’s growth remains one of the key determining factors to the future growth of neighbor economies in the region. In other words, a threat to China’s growth could prove detrimental to the growth in specific economies in the region.
“The lack of sustained and robust demand recovery across the world’s major economic drivers continues to have implications for the risk profiles of Asia Pacific credit ratings. Slowing growth in China, in particular, remains one of the most significant potential risk factors for the region,” Fitch reported.
In a separate text message to financial reporters, BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said a region-wide slowdown will likely manifest in the investment sector, as well as in the exports sector of the $272-billion Philippine economy.
“Economic slowdown will tend to cause some moderation in the propensity of Chinese investment in the global economies including the Philippines. On top of that, exports to China could also see some correction,” Guinigundo said.
“China is a big, vast market with newly prospering consumers. It is an important counterweight to continued weaknesses in other emerging markets and advanced economies,” he added.
While this slowdown seems to affect a lot of countries, especially those who are heavily dependent on China for trade or investment, the success of its growth transition initiative will benefit countries in the long run.
“A structural slowdown and transition to a more sustainable consumption-driven growth path is credit positive,” Fitch said.
“We see a more sustainable economic performance in China as it shifts from export- and investment-led to domestic demand, particularly consumption-led economic growth,” Guinigundo also said.