Fitch forecasts highest lending growth in Armenia

YEREVAN, August 6. /ARKA/. Fitch Ratings agency forecasts the fastest, 21.3% growth in lending for Armenia, Russia’s Vedomosti reports. Lesotho, with its 19-percent lending growth, follows Armenia. Azerbaijan, with its 15.7%, came third and Zambia, with 15.4%, fourth in the ranking. 

Asian countries’ 11% lending growth remained fastest in 2011, as before, and is expected to be recorded at 9% in 2012. Outlooks for Latin American economies are 10% and 5% respectively, and those for Africa and the Middle East are 7% and 5%. The slowest growth (below 3%) was seen in West and South Europe countries. 

Fitch says that rapid lending growth can be a sign of a vigorous economic growth or a symptom of a disease. 

“Nonetheless, a handful of emerging markets have been experiencing a combination of rapid credit growth and asset price inflation that has been associated with bubbles in the past,” says Richard Fox, Senior Director in Fitch's Sovereign group.

Argentina, Hong Kong, Indonesia, Cyprus, China, Turkey and Sri Lanka, where lending growth ranged from 14 to 32% in 2011, were included in high-risk group by Fitch. 

Immovable property prices in these countries 17% higher than the group’s average price, prices for assets 50% higher and their national currencies’ values are overstated by 15%.

Fitch considers such divergences in indicators as a sign of risk. The agency says such countries’ banking systems are vulnerable and unable to withstand outside shocks. 

International Monetary Fund says that lending lever may spur GDP growth amid low economic activity, but slightly. IMF experts think that excessive efforts of governments, particularly Chinese, to spur lending amid slowdown can increase default risks. 

Fitch analysts recommend governments of countries with overheated lending to tighten their monetary policies to ward off shocks. 

Vedomosti says that global demand for loans is falling as things in emerging countries, including China, remain risky. 

Fitch Ratings says in its latest Macro-prudential Risk Monitor that global real lending growth slowed to 4% in 2011 from 5% in 2010 and is forecast to fall further this year.

Its analysts say credit growth in developed markets remains stagnant and is forecast to slow in all EM regions this year. 

The ratio of lending to GDP stabilized in recent years – it stands at 160% in developed countries and at 50% in emerging economies. 

The analysts view slowing lending as a good sign. They are convinced that this lessens financial risks. -0-