Asia-Pacific growth slows on Covid-19 and rising China uncertainty, says S&P

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KUALA LUMPUR (Sept 28): Growth outlooks for the remainder of 2021 have weakened moderately in Asia-Pacific due to persistent COVID-19 waves, said S&P Global Ratings.

In a report titled "Economic Outlook Asia-Pacific Q4 2021: Growth Slows On COVID-19 And Rising China Uncertainty”, S&P projects Asia-Pacific growth at 6.7% this year, down from its previous forecast of 7.5%.

However, it said the outlook for the region is now stabilising.

S&P said vaccination coverage has increased substantially, and there is an increasing policy shift toward greater tolerance of COVID-19 outbreaks, especially in the emerging markets.

It said these factors will enable gradual reopening of economies.

“We forecast growth of 5.2% for the region in 2022 as base effects fade from the data, and our forecast is unchanged from previously.

“Our forecast for China has been revised down 30 basis points to 8.0% growth for 2021 as private demand recovery still looks soft and there is higher near-term uncertainty,” it said.

Meanwhile, S&P said its  2021 GDP growth projection for India is unchanged at 9.5%.

“We revised our 2021 growth forecast lower for the Southeast Asia emerging markets by 1.2 percentage points to 3.1%.

“For the high-income Asia economies, we forecast growth of 3.6%, down from 3.8% previously, as international trade is supporting growth even as domestic demand weakened,” it said.

S&P said New Zealand and Singapore are the only economies it expects to have faster growth in 2021 than our previous forecast in June.

S&P global chief economist Paul Gruenwald said one downside and rising risk relates to a changing growth path in China.

"New regulations and policies are aimed at common prosperity and greater self-reliance through dual circulation, which mark a shift in China's growth strategy,” he said.

S&P said inflation pressures are still muted in much of the region.

‘However, core price inflation has picked up in some economies, including in China, Australia, New Zealand, and India.

In the rest of Asia, core inflation remains low, given lockdowns and the resulting weakness in domestic demand.