SINGAPORE, Dec 26: While the threat of credit rating downgrades hangs over Europe, a few big emerging market economies are on the upswing.

Indonesia provides arguably the starkest contrast. Fitch’s upgrade of Indonesia’s sovereign rating on December 15 restored it to investment grade status for the first time in 14 years. Back in 1997, when the Asian financial crisis exploded, the International Monetary Fund had to step in with a three-year loan worth $10.1 billion at the time.

“Indonesia’s banking sector was not prepared to withstand the financial turmoil that swept Southeast Asia,” the IMF said then. Fast-forward to 2011, and it is European banks that are the focus of concern as the eurozone struggles to come up with a politically palatable way to solve its own debt crisis.

All three of the world’s major ratings agencies have warned that European countries face downgrades if they cannot stem the crisis. Fitch said on December 16 that a comprehensive solution was “technically and politically beyond reach.”

Sentiment toward Europe has turned so dark that the most positive thing Northern Trust economists could say about the outlook there was, “Our base case is that the eurozone does not completely collapse within the next two years.”

Indonesia’s 2012 growth is expected to reach 6.4 per cent, according to a Reuters poll of economists, down only slightly from 2011’s estimated 6.5 per cent. —Reuters