Some banks, such as HSBC, still hold on to the hope that 2008 will be a bigger year for completed deals than 2007. But observers sharing this optimism are starting to look increasingly isolated.

Three months into 2008 and the sector has got off to a slow start, with hardly any significant deals completed.

Even if there were deals around, banks would struggle to lend to them in dollars.

The US Federal Reserve has cut interest rates aggressively, and they now stand at just 2.25 per cent.

However, for regional banks, the cuts will cause further rises in the cost of borrowing in dollars. Speculators will be encouraged to absorb all the dollar liquidity in the region as they bet on a currency revaluation, meaning projects will be charged more for any dollars they try to raise.

Bankers who see the inflow of new work drying up are getting increasingly pessimistic, with even international firms starting to admit a slowdown in financing activity is inevitable.

The one area of optimism is that well-structured deals for major infrastructure projects, backed by good sponsors, will be done. This is partly because those sponsors feel they must force them through the market because of the strategic importance of infrastructure assets to the economic diversification plans of the region’s economies.

Nonetheless, as financing activity slows down, sponsors will be forced to assess just how important some projects are. Those that can be delayed will be. So far, the number of deals shelved for a few months in the hope that the market will recover has been small. Expect to see that change over the months ahead.