MUMBAI -- The slowdown in the US and broader global economy will moderate growth in the ASEAN-4 economies -- Indonesia, Malaysia, Philippines, and Thailand -- in 2008, but strong domestic fundamentals will ensure a limited impact, Standard & Poor's Ratings Services said in a report.

S&P's Asia Pacific chief economist Subir Gokarn said the increase in 2007 exports to the intra-Asia region remained robust and offset the drop in exports to the US.

"Relatively lower inflation and interest rates in the past two years, combined with increased incomes due to favorable terms of trade and healthy remittance inflows, have boosted domestic consumption and investment," Gokarn added.

The ratings agency said expansionary fiscal policies will enhance this momentum in 2008-2009. It added that central banks' stance will shift between neutral and easing depending on how rapidly the region arrests its domestic food shortage problems.

Gokarn warned that major risks to growth include a severe recession in the US or a more severe fallout of the financial crisis.

Uncertainty with respect to oil prices and food supply shortages will threaten inflation and may hit private spending and investment, and therefore economic growth, Gokarn added.

According to S&P, central banks' primary objective, in the current scenario of appreciating domestic currencies, should be to protect price stability.

Currencies are expected to appreciate further in 2008, although not as sharply as in 2007, the ratings agency said.

Pressures arise from expected US dollar weakness, local governments' measures to boost foreign direct investment, and likely impact from an appreciation of the yuan, S&P added.