MANILA, Philippines - Is emerging Asia on the brink of another financial crisis?
Standard & Poor's Ratings Services doesn't think so.
In a statement, S&P said the market turbulence is driven largely by uncertainties around the timing US Federal Reserve's taper, as well as the recent cut in growth forecasts for Asia, including China.
"The road may be rocky in the near term, particularly for the largest deficit countries — India and Indonesia — but we don't think this is the Asian crisis all over again,” Paul Gruenwald, S&P Asia-Pacific chief economist said.
He said financial markets are pricing in a different path for US monetary policy. As this happens, he noted Asian economies, including the Philippines, would likely see bouts of volatility, as well as weaker currencies, lower asset prices, and subdued sentiment and growth.
"But, in our view, this is not a repeat of the 1997 Asian financial crisis,” Gruenwald said.
S&P's chief economist noted that emerging Asian economies' external positions are much stronger, and the region’s central banks are also not defending their exchange rates.
"In addition, the increase in leverage over the past five years has been moderate in the economies with high external risks," he said.
"External financing risks arise from the financing mix of domestic investment and growth. The key metric here is the current account balance, which reflects not only exports less imports of goods and services but savings less investment."
However, economies with a current account deficit, may need to borrow from the rest of the world.
"In times of normal risk appetite, this dependency may not be a problem. However, when markets become risk averse, economies with current account deficits often find themselves facing external financing pressure,” he said.