Emerging Markets: Risks growing

From FT Alphaville:

David Riley, Fitch’s global head of sovereign ratings, argues that “the risk of multiple economic and financial crises across emerging markets is now greater than at any time since the Asian Crisis of 1997-98″, with the greatest threat to Central and Eastern Europe.

With even China’s economy slowing and now forecast by Fitch to expand by just 6% next year, its lowest rate since 1990, emerging markets are forecast to grow by just 2.5% in 2009 compared to more than 6% in the first half of this year - only marginally faster than in the aftermath of the Asian and Russian crises in 1998.

With respect to India,  Fitch Sovereign Review notes:

Emerging market international reserves have fallen by around USD360bn since September (around 15% from their peak, excluding China), most notably for Russia, India and Korea, and further declines are forecast.

Economic momentum in India has taken a decided turn for the worse, and Fitch forecasts growth of only 5% in 2009. The policy response from the Reserve Bank has been strong, but there is virtually no capacity for further fiscal stimulus, with the government having already announced a populist budget for the current fiscal year well ahead of the economic downturn. The fiscal deficit remains a notable rating concern, and there will be no meaningful progress in the coming year as federal elections will be held. Uncorrected, the current fiscal deterioration could threaten medium‐term growth prospects.

While not dire , there is little to cheer in this outlook for India.