News from Fitch Ratings said Tuesday that near-term global economic prospects remain positive but geopolitical concerns and the potential implications for oil prices are a key risk.

Speaking at the Sovereign Group's six-monthly Hot Spots Conference in London, Brian Coulton, Senior Director in the Sovereign Group, noted: "The short-term global economic outlook continues to be favourable in light of the demonstrated resilience of the US economy despite shocks last year, a sustained private sector-led recovery underway in Japan and some improving signs for growth prospects in the euro area."

Brian Coulton also commented on recent developments in China, pointing to the achievements in banking sector reform and eased fears about a hard economic landing that helped to justify last October's upgrade of China's sovereign ratings. Recently announced large-scale upward revisions to GDP data - while underscoring long-standing problems of data quality and transparency in China - would appear likely to ease concerns somewhat about macroeconomic over-investment.

Nevertheless a number of downside risks were present including that of sharper-than-expected household sector retrenchment in the US - in a climate of unprecedented highs in net household debt and debt service ratios - and a renewed surge in oil prices. "Uncertainties over the situation Iran have led us to dust off our USD70 per barrel oil price scenario," Mr. Coulton added, amplifying concerns that the moderate slowdown expected for the world economy in 2006 and 2007 could take a less benign path.

"For emerging markets as a whole, we can easily say that they've never had it so good. Average credit ratings have never been higher, spreads are extremely low by historical standards and with US bond yields having remained steady, overall market borrowing costs have never been lower," Mr. Coulton added. "But with global risk appetite having scaled new heights and global liquidity now tightening, emerging market borrowers would do well to prepare themselves for higher interest rates."

By People's Daily Online