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Another Slowdown May Hit A-PAC Harder: S&P

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Standard & Poor's, whose rating downgrade of the US has created mayhem in markets worldwide, today warned that Asia-Pacific economies, including India, might face a deeper and prolonged impact if the global economy suffers a renewed slowdown.

Without specifically naming India, S&P said the implications for sovereign creditworthiness in the Asia-Pacific would likely be more negative than previously experienced and a larger number of negative ratings actions would follow.

Lowering of credit ratings generally make borrowings costlier and difficult for the country or company being downgraded.

"Fiscal capacities of Japan, India, Malaysia, Taiwan and New Zealand have shrunk relative to pre-2008 level," it said, adding that these countries continue to bear the scars of the downturn.

The governments, it said, would be required to use their own revenue streams to support their economies and financial sector once again.

It further said that if a renewed slowdown comes, it would create a deeper and more prolonged impact.

At the time of the global financial crisis in 2008, several countries, including India, had rolled out stimulus packages facilitating monetary expansion and lower taxes to mitigate the impact of the slowdown.

At that time, India had provided three fiscal stimulus packages totalling Rs 1.86 lakh crore, which helped the economy clock a growth of 8 per cent in 2009-10, as against 6.8 per cent in 2008-09. Prior to the crisis, the Indian economy had been expanding at a growth rate of over 9 per cent over a three-year period.